Saturday, January 23, 2010

Chart of the Day

Ten companies flashing financial danger signs.

Is the recession over? Is Corporate America out of the woods? Some indicators on Wall Street seem to say yes. Yields on junk bonds are way down. A lot of companies that were on the brink a year ago have refinanced, pushing maturities of debt out to 2014 or later. And if last March you had bought an assortment of shares in the shakiest borrowers you probably would have made a huge profit. Auto parts maker ArvinMeritor ( ARM - news - people ) was trading at 32 cents at its low on Mar. 11. It has since climbed 3,503% to $11.53.

But financial risk is not out of the system. Last year saw 207 bankruptcies of publicly traded companies. If there's a double-dip recession, this year's count could easily be as high. Leverage is still a big feature of American business. (more)

The World Financial Report, Jan 22, 2010

click here for audio

Options Indicate 3% S&P 500 Retreat as VIX Advances

Traders are speculating the Standard & Poor’s 500 Index will fall as much as 3 percent, according to options bets on the benchmark gauge for stock market volatility during the last two days.

Wagers that the Chicago Board Options Exchange Volatility Index will jump 46 percent to 32.5 were the most-active contract, data compiled by Bloomberg show. A surge to that level may herald a decline to about 1082 for the S&P 500, said Randy Frederick, director of trading and derivatives at Charles Schwab & Co. The stock gauge slipped 2.9 percent to 1,116.48 since Jan. 20, while the VIX advanced 27 percent to 22.27, the biggest two- day gain since November 2008. (more)

TV cash-for-gold firms 'offer fraction of true value'

Companies offering cash for gold jewellery in a recent flurry of TV adverts are paying a fraction of the items' true worth.

The firms, which have latched on to increases in the price of gold, are 'shockingly bad value', according to consumer group Which?

Three pieces of new jewellery purchased by Which? for a total of £729 drew offers from the firms of as little as £38.57 for the lot.

One company refused to return a £399 necklace free of charge, as promised, on the inaccurate pretext that it was not gold at all. (more)

Doug Casey Says Bet Against Wall Street, Bonds, and after a few months the U.S. Dollar

L: Doug, I saw a Wall Street Journal headline a few days ago that boldly proclaimed, "Car Makers May Hire Soon." Be still, my trembling heart! It’s hard to believe the WSJ would stoop to such a meaningless headline, but I guess they are just trying to give their desperate customers what they want: some hope, whether valid or not. What do you make of the unemployment situation?
Doug: Well, they say that during the depression of the 1930s, unemployment went as high as 25%. That’s interesting, in that at the time, half the people in the country were still farmers. They knew how to make the things they used in daily life with their own hands, and how to grow their own food. There was less specialization in the economy, and people were more self-sufficient. That made them better able to cope with an economic depression. (more)

Business Week - 08 February 2010

FREE magazine download click here

Goldman Sachs Had Bomb-Sniffing Dogs, Police Barricades At Its Headquarters Before Earnings Announcement

As Goldman Sachs prepared to announce its fourth quarter earnings and employee compensation levels yesterday, the bank had bomb-sniffing dogs and police barricades on hand at its New York City headquarters, the New York Post reports.

The decision to boost security as its offices was apparently driven by growing fervor over the bank's huge profits and bonuses. Yesterday, the bank announced that it earned $13.4 billion for the year, and set aside $16 billion for employee compensation. Goldman was widely expected to set aside approximately $20 billion for employee pay, but CFO David Viniar suggested yesterday in a call with reporters that the bank wasn't blind to the "pain and suffering in the world" and "wasn't deaf to the calls for restraint." (more)

The Economist January 23rd - 29th 2010

FREE magazine download click here

20% VAT 'looming' as ministers face mounting debt crisis

A hike in VAT is ‘inevitable’ after the election as the government grapples with a mounting debt crisis, experts warned yesterday.

The Treasury will have to lift the tax from 17.5 per cent to 20 per cent to raise an extra £12 billion of revenue a year, according to analysts at consultancy Oxford Economics.

The next Government may also have to delay the state retirement age to 68 in order to cope with the biggest debt crisis since the Second World War, the report said.

The warning came as official figures revealed the UK government has borrowed almost £330 million a day so far in the current financial year - the most on record. (more)

China's Rebound may cause Inflation