Tuesday, October 7, 2014

Wednesday October 8 Housing and Economic stories


Ho-Ho-Holding Mexican Bimbo Can't Get Paid - (www.zerohedge.com)  Sad but true. Current owner of the Twinkies and Ho-Ho brands, Mexico's Grupo Bimbo, had planned to take advantage of an exuberant public stock market by bringing a secondary stock offering to reduce its leverage. Everything was good-to-go on Friday, but with the market now down a stunning 1.5% from pre-BABA IPO levels, they have pulled the offering: *MEXICO’S BIMBO SAID TO POSTPONE FOLLOW-ON SHARE OFFER: REUTERS.
No comment as yet on the reason, though we assume "market conditions" will be cited as thefickleness of capital markets' animal spirits is once again exposed for all to see.Perhaps Grupo Bimbo should rename themselves Grupo Bimbaba? As Bloomberg reports, Friday things were all go-go-go... Sale of 201.3m shares to be managed by BofA, BBVA, Citi, HSBC, JPMorgan and Santander, Bimbo says in e-mailed statement. Offering in Mexico, U.S. and other countries will represent a capital increase of as much as 4.3%: Bimbo

The short-sighted US buyback boom  - (www.ft.com) At a time of soaring profitability, US companies have piled up huge amounts of cash, much of it parked offshore. Yet investing it in long-term growth is the last thing on their mind. According to Barclays, US companies have lavished more than $500bn in the past year on stock buybacks -- a multiple of what most are spending on research and development and other capital investments. In the first six months of the year, buybacks surged to $338.3bn -- the largest half-yearly volume since 2007. The rationale is simple. By reducing the volume of outstanding shares, chief executive officers increase earnings per share. That in turn lifts their pay, which is heavily tied to short-term stock performance. If you need an explanation for why the top 0.1 per cent is doing so well, start with equity-based compensation. But the impact is much broader than that. According to William Lazonick, a scholar at the University of Massachusetts Lowell, seven of the top 10 largest share repurchasers spent more on buybacks and dividends than their entire net income between 2003 and 2012. 

New U.S. tax rules chill 'inversion' deal-making; shares dive - (www.reuters.com) Tough new U.S. government rules on corporate "inversion" deals, aimed at making the tax-avoidance transactions less desirable, undermined share prices in nearly a dozen companies on both sides of the Atlantic on Tuesday. Analysts and tax lawyers were studying the damage to deals currently in the works and the outlook for future such deals, in which U.S. companies escape high taxes at home by shifting their domiciles abroad. Although the new rules will make some deals costlier and others more difficult, fast-food chain Burger King Worldwide Inc (BKW.N) said it will proceed with its $11.5 billion transaction with Canada's Tim Hortons Inc (THI.TO). "This deal has always been driven by long-term growth and not by tax benefits," the two companies said in a statement.

Opinion: Everyone is a genius in a Fed-induced stock rally - (www.marketwatch.com) Bullish stock investors are feeling invincible. For example, I recently received a taunting email from an investor who is 100% convinced that the Dow Jones Industrial Average DJIA, -0.68%  will hit 18,000 by January because author and professor Jeremy Seigel said so. This investor advised me to buy mutual funds or stocks so that I do not “miss out on the rally that is certain to come.” Really? A 5% gain is possible but hardly certain. At market tops, it is common to see what I call the “high-five effect” — that is, investors giving high-fives to each other because they are making so much paper money. It’s happening now. I’m also suspicious when amateurs come out of the woodwork to insult other investors…. Also, the number of bears surveyed at Investors Intelligence remains at historic lows (15.2%). And then one clown proclaims in a column, “This is a Market that Will Never Go Down!” For those who didn’t read my previous column , I am that clown, but I was being sarcastic. The scary part is that many people actually do believe this market will never go down.

Banks face fresh curbs on leveraged loans - (www.ft.com) US banks that flout new regulatory guidance on leveraged lending risk higher capital penalties when the Federal Reserve undertakes its annual stress tests of the banking sector, according to people familiar with the process. The Fed has begun to warn banks defying its guidelines that making risky leveraged loans could affect its assessment of their loan loss rates in the next stress test, these people said. That, in turn, would affect the Fed’s capital ratio projections. The decision to link leveraged lending specifically to the Fed’s annual “comprehensive capital analysis and review” is likely to alarm Wall Street, since failing the test constrains a bank’s ability to pay dividends to shareholders or to its parent company. The Fed and the Office of the Comptroller of the Currency last year issued guidelines to govern the kind of loans banks are able to make to debt-laden companies, as they sought to cool potentially overheated credit markets.





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