Rochester, NY 8/24/2009 7:42:43 PM
The Dow was Go, Go, Go on Friday, but Now It's Monday Morning
Dow up 1.5% Friday, but what's up for this week
Is the recession over? Economist Nouriel Roubini noted in an op-ed there may a danger of double-dip recession. Seems that the stimulus policies, which are now unwinding, have the potential to undermine the recovery? How so? Large deficits have the very real potential of pushing up the numbers (rates) for borrowing, while also cutting off economic growth at the same time. Seems we're sitting on a see saw, trying desperately to balance things. If there a new speculation in oil drives the price back over $100 that literally is the proverbial "pebble in a quiet pond", with energy, food and oil having a butterfly effect on any number of ancillary industries and products.
The Dow was up around 1.5% on Friday and all indicators are pointing toward a recovering economy. Temper that with the cash for clunkers coming to end and alas, we still have to wonder what will happen next. That said here's what's up early Monday.
South of the border (ACH), Chinalco and Rio Tinto (RTP) are talking (or beginning to) about a possible mineral deal, and that's not vitamins and minerals, but bauxite and alumina. The talks couldn't be confirmed with Chinaco, who said only they are open to possibilities. Note that the two companies have adjacent bauxite deposits down under, in Australia. Premarket is taking note RTP +3.3%, ACH +1.6% (7:00 ET).
"The rain in Spain falls mainly on the plain", that may be true, but Spain's second-largest bank is enjoying its day in the sun, having assumed the deposits of Guaranty Bank (GFG) on Friday. This marks the first foreign company to buy a failed U.S. bank during this current economic crisis. Of course once the "starting gun" is pulled, there are others in the race with Toronto-Dominion Bank (TD) and BNP Paribas (BNPQY.PK), both expressing interest in entering the fray. And while the FDIC may have some doubts about handing over the reins to a bank without domestic regulatory history, that must be weighed against the insurance fund which has been taking quite a hit.
The game is afoot in the drug biz, with Warner Chilott opting to buy Procter & Gamble (PG) for around $3.1 billion. Keep an ear opened as an announcement could come today. Of course nothing this big can or will happen without financing and that coming (possibly) strong from JPMorgan Chase (JPM), Bank of America (BAC), Credit Suisse (CS), Citigroup (C), Barclays (BCS) and Morgan Stanley (MS), to the tune of $4B. Not only does this bode well for the buy, but also speaks to a recovering economy since there is money to lend. Of this $4B, Warner Chilott will use around $1B to refi existing debt, and that is something we can all relate to.
There have been 81 bank failures so far this year, are there more ahead? Probably so according to analyst Richard Bove who predicts another 150-200 will fall like the proverbial dominoes during this current crisis. If that's true, it doesn't matter if your Bill Gates or the FDIC, that's gotta hurt not to mention the ancillary affect on the banking industry as a whole. With these numbers as much as 25% of 2010 pretax income will go towards FDIC fees.
Its Monday morning folks and the game is a foot.
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