The idea that LBOs carry massive debt that is never paid down, leaving behind “financial zombies on the ragged edge of insolvency,” defies historical principles of LBOs, writes David Stockman. Blackstone’s LBO of Hilton Hotels is one of these "free market defying zombies" – “one global business slump away from bankruptcy.” And it just filed for an IPO.
By Marin Katusa, Chief Energy Investment Strategist: A natural-resource insider asking who Lukas Lundin is would be like a Brit asking who the Queen of England is. You just know. Fact is, there is no stronger figure in the resource sector than Lukas, who heads the Lundin Group founded in 1971 by his father, Adolf Lundin, a legend in the sector.
By Chriss Street: President Obama sought to showcase his leadership on the anniversary of 9/11 by leading an international coalition against a brutal tyrant in Syria. After much dithering, neither Congress nor the international community was willing to follow. A Russian-controlled settlement may be a defeat for the President’s ego, but....
Men’s Warehouse joined the crowd of revenue-challenged retailers when it reported results and cut guidance. Revenue fell, profit plunged. As with its peers that had already reported, it’s not so much that sales were crummy – gosh, they were – but that the excuses they came up with to keep their stocks from crashing were even crummier.
By The Energy Report: Conflict in the Middle East has Europe scrambling to find reliable energy sources closer to home. This means investors should consider watching for a big shale discovery in a friendly location. Energy expert Marin Katusa profiles natural gas and uranium companies that could offer stable supply in a time of crisis.
With Q3 GDP growth tracking 1.6%, Wall Street strategists, whose bullishness has been deafening despite realities on the ground, are starting to hedge their bets with some unusually candid analyses. Seeing overvalued assets everywhere, they’re struggling to point at solutions, other than a crash. And they predict a sour future for stocks and bonds.
By Michael Lombardi, Profit Confidential: “Whenever you find yourself on the side of the majority, it’s time to pause and reflect,” Mark Twain said. When I look at stock indices, the chants I hear are “buy, buy, and buy even more.” They believe stocks will continue to march higher. Even the worst-case scenarios look overly optimistic. Outright euphoria?
By Dennis Miller, Money Forever. A few weeks back, I penned an article highlighting how most older folks fear running out of money even more than death. Several readers suggested that continuing to work as long as possible is the best way to quell that fear. Could the solution be that simple?
Dizzying home-price increases fused with pandemic hype and trillions from the Fed into a self-propagating force. It’s now accepted that housing will recover all the way to where it was in 2006, a sign the Fed has done its job, that it cured the ill that has dogged this economy for so long. Prices of 2006 are no longer "the peak of the housing bubble" but a goal.
By Michael Lombardi, Profit Confidential: Automakers are exuberant. In August, light vehicle sales increased 17% from a year ago. Consumers are spending! Maybe we will see some economic growth. Sadly, this is a one-sided conclusion. Turns out, car loans are ballooning, and delinquencies are jumping.
Verizon will unleash a tsunami of money on Wall Street. To pay for its $130 billion acquisition of Vodafone’s share of Verizon Wireless, it will print $60 billion of its own inflated stock. It will borrow the rest – much of it via the largest bond sale in history, though it's drowning in debt. Now that sale is slamming the already deflating bond bubble.
“Seize the ground of new media,” Chinese President Xi Jinping said elegantly when he told state-owned media to get on the ball. So, effective today, the next chapter in seizing the ground of “new media” is this: people found by the Chinese judicial machinery to have posted libelous language online can expect three years in the hoosegow. Conditions apply.
By Marin Katusa, Chief Energy Investment Strategist: Everyone knows that investing in the junior resource sector is dangerous. There are few investments where the odds are so high that they will fail and you will lose your money. Yet, everyone is looking to make the "Big Score" – that one special discovery that will make fortunes for investors.
So the Japanese economy is booming. GDP growth in the April-June quarter was revised up to 3.8%, driven by higher big-ticket spending and government outlays. The January-March quarter was revised up to 4.1%. Three quarters in a row of growth, fed by something we’ve seen before. In 1996. And it ended in tears.
The founders of the LBO industry – KKR, Blackstone, Apollo, TPG, and Bain Capital – are stuck in giant deals that have turned into debt zombies. The outbreak of mega-LBO mania during 2006–2007 reflected a financial market deformation that sowed recklessness across the entire private equity space. And the debt zombies are still out there.
For Japan’s megabanks, lending has rebounded. But instead of funding industrial projects in Japan, they’re funding acquisitions overseas and highfalutin real-estate speculation in Tokyo. They wrote up stock holdings and extracted fees from frenzied trading. Profits surged. They’re the prime beneficiaries of Abenomics. But smaller banks are not so lucky.
By Don Quijones: Countries like Germany and Turkey have demanded explanations from the U.S. and U.K. governments regarding the NSA’s and GCHQ’s surveillance and wire-tapping program. But Spain’s Rajoy regime has remained conspicuously silent – despite the fact that this surveillance is a clear infringement of Spain’s domestic and external affairs.
Jobs Don’t Keep Up With Population Growth, But Unemployment Rate Drops Elegantly, Keeps Intact The Pretext For Fed "Taper"
When the Fed said it wanted to print more money in order to create jobs, it’s this graph that came to mind. And when it now says that it wants to taper that process because it already created enough jobs, it’s also this graph that comes to mind. Job creation and economic growth were just a pretext – a pretext that has been very crummy.
By Robert M. Cutler of Oilprice.com: Having recently acquired big stakes or outright ownership of major Canadian energy firms, Chinese companies continue their penetration of Canada's energy sector by targeting the juniors. The latest: Saskatchewan-based producer Novus Energy, to be acquired for $320 million by Yanchang Petroleum International.
Bonds Bleed: Largest Bubble In History Unwinds, But The “Great Rotation” Into Stocks Is Deceptive Wall Street Hype
The bond-fund massacre is spectacular. Antsy investors yanked $7.7 billion in August out of the world's largest bond fund, Pimco’s Total Return Fund. In July, they’d yanked out $7.5 billion, in June $14.5 billion. From May 1 through August 31, the fund’s assets shriveled 14%. Other bond funds got hit too. And September is shaping up to be even worse.