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Opening Bell: 06.01.09

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GM Declaring Bankruptcy (finally) (Bloomberg)
Shocker alert: "General Motors Corp., the world's largest automaker for 77 years, will file for bankruptcy today, a landmark for an industry that defined American economic might.
The filing, which GM executives said last year wouldn't happen, marks the plunge of a company that used to make more than half the cars bought in the U.S., including the Corvette, the Cadillac and the Pontiac GTO. A General Motors affiliate, Chevrolet-Saturn of Harlem Inc., sought bankruptcy protection today, the first of many filings in the Chapter 11 process."
Robert Reich: General Motors holds a mirror up to America (FT)
I'm not often in agreement with Robert Reich (especially when he's on CNBC), but this piece pretty much hits the nail on the head re: rationale for bailing-out GM (etc). Read the whole thing, but he points out the obvious facts that so many seem to be ignoring (on purpose or otherwise):
"The only practical purpose I can imagine for the bail-out is to slow the decline of GM to create enough time for its workers, suppliers, dealers and communities to adjust to its eventual demise. Yet if this is the goal, surely there are better ways to allocate $60bn than to buy GM? The funds would be better spent helping the Midwest diversify away from cars. Cash could be used to retrain car workers, giving them extended unemployment insurance as they retrain.
But US politicians dare not talk openly about industrial adjustment because the public does not want to hear about it. A strong constituency wants to preserve jobs and communities as they are, regardless of the public cost. Another equally powerful group wants to let markets work their will, regardless of the short-term social costs. Polls show most Americans are against bailing out GM, but if their own jobs were at stake I am sure they would have a different view."
Chrysler Could Exit Chapter 11 Today (WSJ)
Keeping with the auto theme, apparently Chrylser's "reorg" may be done after only a month. Let this be a continuing lesson in the consequences of trading against the Government.
Investors Could Live without AAA (Reuters)
I'm not sure why anyone besides retail brokers and clients really give much of a damn about S&P/Moodys/Fitch ratings given their epic failures and clear conflict of interest, but the point is that there ain't a whole lot of AAA around, and the number of the endangered could still drop further.
"The already-diminished pool of Triple A debt available to investors would be so small without the U.S. government (were it to be downgraded) that funds would almost be forced to accept debt at a slightly lower rating. No other debt market could provide the depth or trading liquidity of U.S. Treasuries.
S&P lists only 102 sovereign and local government issuers as well as eight corporates with Triple A ratings. In addition, there are a number of financial institutions... Therefore, many investors would probably accept the lower rating if the United States were downgraded, instead of sticking to the top grade and scrambling for a relatively small pool of assets, which could drive up prices. Some investors might even redefine the lower rating as effectively top-notch."
Air France Jet Missing Over The Atlantic (WSJ)
"An Air France official said the airline has lost contact with a plane carrying 228 people from Brazil to Paris. Air France spokeswoman Brigitte Barrand said, "Air France regrets to announce that it is without news from Air France flight 447 flying from Rio to Paris." She said Monday the flight was carrying 216 passengers and 12 crew members. Brazil's air force said a search began Monday morning near the Brazilian archipelago of Fernando de Noronha."

Investors skeptical on stock market rebound (FT)
But what about the green shoots?!
"Barclays Capital has revealed that just 17.5 per cent of the 605 investors interviewed for its quarterly FX investor sentiment survey - including central banks, asset managers, hedge funds and international corporate customers - think risky assets have further to rise. This is one aspect of a generally gloomy outlook for the global economy, which undermines optimism that "green shoots" of recovery are starting to emerge.
Six out of every 10 respondents believed that the recent rise in equities is a "bear market rally", indicating that global investors still have a large share of their funds parked on the sidelines in cash."

Geithner Tells China U.S. to Tackle Deficit as Economy Recovers (Bloomberg)
Perhaps this is the cruel joke of a translator with a severe hatred of elfin creatures? Or just empty political rhetoric, whatever:
"We are going to have to bring our fiscal deficit down to a level that is sustainable over the medium term," Geithner said. "This will mean bringing the imbalance between our fiscal resources and our expenditures down to the point -- roughly 3 percent of GDP -- where the overall level of public debt to GDP is definitely on a downward path."
That would be a reduction from a projected 12.9 percent this year.
The U.S. will need to phase out the tax cuts and bank rescue programs set up to help the economy recover from a deep recession, Geithner said. Spending cuts also will be needed, along with health care reform and new budget constraints like pay-as-you-go rules."
--Brought to you by Analyst


Opening Bell: 05.04.12

BofA Sees $5 Billion Collateral Need in Credit Downgrade (Bloomberg) A two-level downgrade of long-term senior debt ratings would have prompted the bank to post about $5.1 billion of collateral tied to derivatives contracts and other trading agreements as of March 31, the Charlotte, North Carolina-based firm said yesterday in a regulatory filing. It would have had to post an additional $1.1 billion of collateral if trading partners opted to tear up contracts in a two-level cut. RBS claims 'pleasing progress' though loss triples (AP) RBS, 82-percent owned by the British government after a massive bailout in the global the financial crisis, posted a 2011 first quarter net loss of £528 million. The lender said losses soared owing to an increase in the value of its outstanding debt to £2.46 billion. "As RBS's credit spreads tightened during the quarter, a charge of £2,456 million was booked for (our) own credit adjustments," RBS said in a statement. But the bank's underlying performance was brighter, with RBS posting a first quarter operating profit of £1.18 billion. RBS also confirmed that it would repay the last of emergency state loans totalling £163 billion but the British government will still own almost all of the bank after a £45.5 billion bailout following the 2008 financial crisis. "The start of 2012 has shown pleasing progress at RBS within the context of a flat economic environment," chief executive Stephen Hester said in the statement. Employers in U.S. Added Fewer Jobs Than Forecast in April (Bloomberg) Payrolls climbed 115,000, the smallest gain in six months, after a revised 154,000 gain in March that was larger than initially estimated, Labor Department figures showed today in Washington. The median estimate of 85 economists surveyed by Bloomberg News called for a 160,000 advance. The jobless rate fell to a three-year low of 8.1 percent, and earnings stagnated. Facebook Targets $96 Billion Value (WSJ) With the pricing, Facebook is anticipated to raise as much as $13.6 billion, above earlier expectations of $10 billion. In a regulatory filing, Facebook said the company would seek to sell 337.4 million shares, with about half of those being sold by founders, employees and investors. The only U.S. issuers that have raised more money in an IPO were Visa Inc. at $19.7 billion in 2008 and General Motors Co. at $18.1 billion in 2010. Zuckerberg Facebook IPO to Make Him Richer Than Ballmer (Bloomberg) So that's exciting. Warren Buffett Has 'No Plans To Invest In Facebook IPO' (CNBC) When asked whether the current attention surrounding Internet IPOs reminded him of the tech stock bubble of the late 1990s, the Oracle of Omaha said, “It is not a bubble ... this is not what we were seeing in late 1999 all the way into 2001. We aren’t in any bubble phase of anything.” Inmates Dance, Deputy Fired (OBJ) Some inmates did the worm, others chose the old school robot. Each dance was performed to the beat of hip-hop artist Usher on command from a now-fired Summit County deputy. The inmate prize: use of a jail microwave. The charges are revealed in an internal affairs report released Wednesday. Deputy Dominic Martucci, 35, was fired for violating the department’s policies, including a mandate that inmates be treated humanely. Martucci is accused of ordering five inmates dance to Usher’s Yeah! song and then inviting other deputies to watch during an early evening shift on April 11. The inmates danced their way to regaining use of a microwave that they had lost earlier that day. Fitch CEO: US Downgrade Not Likely Before Election (CNBC) "We currently have the U.S. on a negative outlook, which actually suggests we think there is the potential for a downgrade," Taylor said in an interview. "It's too early to tell whether that will turn into an actual downgrade or not,” he said. “We think we still need to see what's going to happen through the elections and what actions are put in place subsequent to the elections. I think it's very clear that the U.S. does need to do something to deal with the debt problems built up since the financial crisis," he added. New Ripples For Gupta Case (WSJ) Mr. Gupta's criminal trial for securities fraud and conspiracy is scheduled to begin May 21 and expected to last about three weeks. Mr. Gupta has pleaded not guilty. His lawyer, Gary Naftalis, declined to comment for this article but previously has called the accusations "totally baseless." The Manhattan U.S. attorney's office also declined to comment. Federal prosecutors in Manhattan have taken note of the spike in trading in Goldman, which began as the firm's board concluded a special meeting to approve the deal that afternoon, according to people familiar with the matter. Galleon traders also noticed the climbing stock, conversations recorded on government wiretaps show. "Someone had this before us, someone, whatever went on, something happened," Galleon trader Ian Horowitz told Mr. Rajaratnam in a phone call the next morning, caught on tape by the Federal Bureau of Investigation. Goldman Readies Low-Cost Bond PLatform (WSJ) Goldman is preparing to roll out a bond-trading platform on which it will charge lower fees than on typical bond trades, according to people familiar with the matter, a move that could help retain customers tempted by rival trading venues being set up by BlackRock Inc. and others. AIG Invests $7.4 Billion at 5.3% to Boost Returns, Adds RMBS (Bloomberg) “We continue to be opportunistic with our investments in structured securities in order to improve yields, increase net investment income and offset the impact of a lower interest rate environment,” Wintrob said. BofA Talks Deal On Ex-Broker Pay (WSJ) The former Merrill brokers left the firm after the 2009 takeover by Bank of America and claim they are owed deferred compensation as a result of the deal. They were emboldened last month by an arbitration ruling ordering the Charlotte, N.C., company to pay more than $11 million to two former brokers with related complaints.