High yield securities are little changed while the markets are trying to figure out where to go from here. Oil is having a good day, looks like it wants to make a run on 50.
| CLJ09.NYM | ...Crude Oil Apr 09 | ...48.37 | ... 1.02 .......(2.2%) |
The furor of AIG bonuses continues, but it looks like it's a lost cause to avoid paying the money. The money is based on contracts & there's probably not one union person who will suggest that voiding a contract for any reason makes sense. The guys will have to live with embarrassment if the names are brought to light. But for that kind of money most could live with a little embarrassment. AIG tried to justify the payments with the story that this money was used to pay for the brightest & most talented employees. You know, the guys who gave us the AIG mess. The employees are largely not in the dull insurance business, instead the guys who play with $Bs in derivatives. After Stanley O'Neal ran Merrill Lynch into the ground, he was told to take his $150M & go (as per his contract). Sadly the bigger story about AIG spreading its bailout money around the world to help foreign banks involves $Bs & has been lost. After learning an expensive lesson, the gov will clamp down on future aid to AIG. Swell!
Monthly housing starts jumped 22% last month to a 583K annual rate, demand for new condos & apartments was strong. However, the annualized rate remains at a dreary level & the glut of housing will be around for a very long time.
•Housing Starts in U.S. Unexpectedly Rise Amid Surge in Condo Construction
Corporate borrowing is tough to get & expensive. Pfizer (PFE), a Dow stock, has debt still (barely) rated AAA. They will borrow over $13B to help finance the Wyeth purchase at rates of 1.95-3.45% above benchmark rates. Those rates are considered expensive but necessary during these times. As a result, their debt is expected to be downgraded to AA. Coca Cola (KO), another Dow stock, will borrow long term to pay off commercial paper. This is becoming common among the biggest companies who issue commercial paper. The cost in added interest will exceed $75M but will assure they have funds going forward versus having to worry about constantly rolling over commercial paper. Just another cost of the credit crisis.
•Pfizer Plans to Sell $13.5 Billion of Notes to Fund Acquisition of Wyeth
•Coca-Cola Flees Commercial Paper's Low Rates for Safety in Long-Term Bonds
The fate of financials will determine market changes.
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