Another week, another major ratings agency downgrade at the top of the news. But once we get through those storylines, perhaps there were a few other items from this past week which are worthy of our attention. So let’s get to it. (Of course U.S. cash markets are closed Monday while the globe will be trading, so we apologize in advance if we have missed a market-moving story after this piece is posted).
“Au Revoir AAA!” --NY Post business section lead story Saturday (reports on Sunday that some angry picketing outside S&P offices in Paris). “Today's rating actions are primarily driven by our assessment that the policy initiatives that have been taken by European policy makers in recent weeks may be insufficient to fully address ongoing systemic stresses in the euro zone." --S&P in its press release Friday
“S&P’s downgrades provide no meaningful new information to investors but raise borrowing costs, complicate the move to lasting solutions for the Euro zone, and merely stoke a sense of crisis, but it is not a catastrophe. We have taken far-reaching measures and are accelerating reforms towards a stronger economic union.” --paraphrase of several responses from key European leaders
“The Honey Badger Goes Hungry.” --The Washington Post, commenting on Tyrann “Honey Badger” Mathieu being a non-factor in LSU’s wipeout by Alabama in the BCS National Championship game. (The lowest-rated BCS title game ever and almost unwatchable, we thought). A video of a fearless “honey badger” ignoring bee stings and cobra bites to “take what it wants” has been a huge You Tube sensation.
“We believe these returns were reasonable given the environment, although the return for the fourth quarter was modestly disappointing. We see a mild recovery which actually might be strengthening, and it's broad. But I would put myself in the 'increasingly worried' category when it comes to Europe." --JPMorgan Chase CEO Jamie Dimon, in their 4th qtr. results conference call.
“Manufacturing is a lot like bacteria. As long as you don’t kill them all, they’ll flourish again when the conditions are right.” – Martin Holdrich, senior economist at Woods & Poole Economics Inc. in Washington, referring to brightening prospects on hiring for U.S. industrial companies and some optimism shown by U.S. CEO’s
“The S&P 500 has had positive returns from the beginning to the end of earnings season 75% of the time when Alcoa’s stock has finished higher the day after they report earnings.” --Bespoke Investment Research (for the record, AA was up $0.01 on the day after reporting 4th Qtr. earnings). On Sept. 30, 2011, analysts projected that fourth-quarter earnings at companies in the Standard & Poor's 500 index would grow 14.1 percent, according to Bespoke. By Jan. 3, the growth estimate had fallen to 6.2 percent. Standard & Poor's expects Q4 earnings for S&P 500 companies to shrink 3.9% from Q3. (If that happens, it would be the first contraction in 11 quarters).
“Judgement Day for Tim Tebow.” --several sports websites, commenting on the beating given the Denver Broncos by the New England Patriots (the two blog questions being asked: did the pre-game rituals of “white witches” from Salem, MA have anything to do with the 45-10 outcome? And is there any still any truth to the rumor that Tebow will become a spokesperson for “Miracle Whip”?)
“President Obama has had a lot of recent experience with private equity himself.” --Mitt Romney on CNBC this week, in a very lame, unfunny and defensive comment (we think), referring to the government bailout of U.S. companies. “They are putting free enterprise on trial, “ Romney added (a comment we have more sympathy for).
The story of both fellow Republican and Democratic attacks on Romney’s record at Bain Capital is getting hotter by the moment, with the South Carolina primary seen as the last stand for several Romney opponents. A very curious angle emerged, unconfirmed, from website “The Drudge Retort”:
“Bain Capital worked with Obama's auto bailout team in 2009 and advised it to cut dealerships. Steven Rattner, former Obama car czar, has defended Romney about Bain cutting jobs, laying off workers and closing companies while it took out millions in profit for itself. ‘A private equity investment is made with the hope of improving the profitability of the portfolio company,' Rattner wrote in Politico. ‘Often, this means replacing management or reducing unnecessary head count -- firing people.’”
“Pres. Obama promised a balanced budget and we now have it: the national debt is now equal to GDP.” --New York Post editorial cartoon. (We have no comment on the accuracy of this claim, as we have seen some wildly different sets of numbers depending on how you look at it… as best we can figure, we are significantly worse than Germany and a lot better than Italy, Greece and Ireland, among many others. And we are pretty sure it is not fair to place the blame all on Obama’s watch).
"The problem with socialism is that eventually you run out of other people's money to spend." --Mitt Romney quoting Margaret Thatcher, although some sources claim she never said such a thing (perhaps Meryl Streep did?). Along these same lines, Nicholas Kristof in Sunday’s New York Times said “According to many Republicans, another term for Obama and we will all soon be greeting each other with double pecks on each cheek.”
“It’s likely 2011 will be the worst year for banks since 1938 and 2012 not feeling much better.” --Mike Mayo, bank analyst for Credit Agricole Securities (an interesting comment in the context of other stories on significant banking layoffs scheduled for this year AND “employed” senior bankers supposedly threatening to walk if their bonus cuts are too drastic.)
“We are in a liquidity trap that requires a whole different set of policies. The private sector has checked into the Betty Ford Center for balance sheet rehabilitation.” --Former PIMCO Managing Director Paul McCulley in exclusive CNBC interview (not quite sure we know what that means but it was colorful and said with conviction. Since Mr. McCulley is now at The Global Interdependence Center think tank in Philadelphia, he must know what he is talking about).
“The Lincoln MKX concept car is ‘smoking hot’.” --CNET, at the Detroit North American Auto Show, where the Lincoln MKX started to spew smoke from an electrical problem on the convention display floor.
“Corporate profits are at the highest levels since 1950. The economy is incredibly resilient. If we can just get employment going again, we will hit 5% GDP before anyone knows it.” --the usually optimistic Larry Kudlow (whose attitude we admire)
“When I first heard there were piranhas in the river we will swim in I was a little nervous.” --Miami pro triathlete Manuel Huerta on an Olympic qualifying triathlon event in La Paz, Argentina (he later was told the piranhas were not of the “aggressive” sort)
“The SEC will no longer permit ‘neither admit nor deny’ pleas in criminal cases.” --wire reports, on the pressure put on the
