Greg Zuckerman says the $25 billion proposed buyout
of Sallie Mae has more specialists in the private equity industry thinking that the financial-services industry, once considered off limits for buyouts, might be ripe for others. “Among those that could be takeover bait are Countrywide Financial Corp., CIT Group Inc. and iStar Financial Inc., according to some traders and analysts. The fact that Blackstone Group also vied for Sallie Mae suggests that other private-equity firms could be eager for these kinds of deals,” he writes
in today’s Wall Street Journal.David Rosenberg, Merrill Lynch economist
, sees current market activity as the reverse of the events of late 2002 and early 2003. “Back then, the equity market just kept on slip-sliding away even as the economic data was turning up in fits and starts and we were moving further out of recession-mode – which had actually ended more than a year earlier,” he writes. “Fast-forward to today and we see the exact opposite – the data have weakened sharply for a few quarters now, no sign of a turnaround in growth, and equities are hitting new highs.”
Henry Blodget thinks the idea that Time Warner could end up spinning off its cable businesses to focus elsewhere is a bit off-kilter. “The theory behind the strategy, apparently, is that cable will become increasingly commoditized and less relevant in a world with the Internet and Internet TV, etc,” he writes. “It was, of course, exactly this sort of thinking that led to the “transformative” AOL-Time Warner merger in the first place.”
George Gutowski, the Financial Skeptic, takes Jefferies to task for its earnings release. “Jefferies is playing a dangerous game. They know most investors and financial media will not listen to and or read the conference call transcript,” he writes. “The press release has such poor disclosure that it will be ignored and viewed as useless by investors.”
Robert Doll, global chief investment officer at BlackRock, says economic softness may last for a couple more quarters, but says equities should hang in there. “We believe the conditions for a bear market simply do not exist, given solid stock valuations, a market that is no longer overbought from a technical perspective and continued high levels of public and private buyout and merger-and-acquisition activity,” he writes in a quarterly update. “Additionally, we would point out that although earnings growth is slowing, we are not expecting any sort of profits recession.
Vinny Catalano writes of how a virtuous cycle of investment, profits and economic growth can break down based on certain economic events or shocks to the system. “It’s easy to see how a serious contraction of U.S. consumer spending can break the virtuous circle – lower U.S. consumer spending begets lower capital flows to emerging economies and oil-exporting countries, which lead to fewer recycled capital into debt instruments, which puts upward pressure on rates, which impacts the borrowing availability to U.S. consumers. And so it goes,” he writes.
Herb Greenberg says executives at Netflix who believe Blockbuster won’t be able to maintain the low prices that are hurting Netflix’s bottom line are smoking something. “Customers are no dummies. They obviously like the combination and flexibility of mixing bricks-and-mortar with online,” he writes. “More importantly, they have now proven that if service and selection are similar, they’ll go with the company that offers the lowest price, margins be damned.”