Monday, May 12, 2014

Markets advance on buyouts

Dow shot up 91 to new record territory, advancers over decliners 4-1 & NAZ rose a very big 60.  The MLP index rebounded 3 to the 487s & the REIT index was up fractionally in the 299s.  Junk bond funds rose & Treasuries were a tad weak.  Oil went above 100 & gold climbed back over 1300.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLM14.NYM...Crude Oil Jun 14...100.64 Up ....0.65 (0.7%)

GCK14.CMX...Gold May 14......1,291.10 Up ...3.80 (0.3%)

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China's broadest measure of new credit fell last month as authorities extended their campaign to tame a debt boom even as construction & manufacturing data point to risks that the economy’s slowdown will worsen.  Aggregate financing was 1.55Y yuan ($249B) in Apr, according to the People’s Bank of China, compared with 2.07T yuan in Mar.  New local-currency bank loans were 774.7B yuan, down from 1.05T yuan the previous month.  These figures add to signs that officials are reluctant to heed calls for monetary stimulus, with President Xi Jinping saying in remarks Sat that the nation needs to stay “cool-minded” amid what analysts forecast will be the weakest annual growth since 1990.  PBOC Deputy Governor Liu Shiyu said that shadow banking threatens to undermine the financial system, as policy makers try to rein in credit.  Aggregate financing compared with the estimate of 1.48T yuan, while the projection for new yuan loans was 800B yuan.  M2, the broadest gauge of money supply, rose 13.2% from a year earlier, after record-low growth of 12.1% in Mar.

China’s New Credit Declines

Hillshire Brands agreed to buy Pinnacle Foods (PF) for about $4.3B, gaining products such as Birds Eye frozen foods, Duncan Hines baking mixes & Vlasic pickles.  Investors will receive $18 in cash & half a share of HSH for every Pinnacle share.  The total is almost 20% higher than PF closing price on May 9.  Including debt, the deal is valued at about $6.6B.  The purchase lets HSH add frozen-food brands such as Hungry-Man, giving the company a larger presence in grocery stores.  HSH CEO Sean Connolly will run the combined company.  The combination is expected to produce $140M in annual cost savings, stemming from supply-chain improvements & consolidation of expenses.  HSH, with $4B in revenue, agreed to buy Van’s Natural Foods for $165M last month & also bought gourmet jerky maker Golden Island for $35M in Sep.  PF serves more than 85% of American households with a #1 or #2 market position in 10 of 13 grocery categories in which it competes.  The purchase of Pinnacle reflects a multiple of 9.6 times adjusted earnings before interest, taxes, depreciation & amortization.  The deal is expected to close by Sep.  HSH was known as Sara Lee before spinning off its tea & coffee segment & renamed itself Hillshire in 2012.  HSH fell 2.16 (6%) on the news.  If you would like to learn more about HSH,
Click here for a FREE analysis of HSH and be sure to notice the intermediate time frame

Hillshire Brands to Buy Pinnacle Foods for $4.3 Billion

Hillshire Brands (HSH)

Russia indicated it “respects” the results of 2 disputed referendums in eastern Ukraine that separatists said backed autonomy as the EU imposed sanctions on companies in Crimea for the first time.  Russia praised the high turnout in yesterday’s ballots.  The US & EU deem the votes illegal & the Ukraine gov called them a “farce.”  Donetsk showed 90% backing for the breakaway plan, while 94-98% supported autonomy in Luhansk, with turnout at 75%, according to Russia’s state-run RIA Novosti news service.  Russia “assumes that the practical implementation of the referendums will be realized in a civilized manner, without any relapses of violence,” according to the statement.  The votes went ahead amid violent clashes between pro-Russian rebels & gov troops, who are trying to wrest back control of Ukraine's eastern provinces before the May 25 presidential election.  Ukraine & its allies accuse Putin of stoking the unrest, which is threatening to rip the former Soviet republic apart.  The US & EU are threatening more sanctions to target Russian industries.

Russia Hails Local Votes to Split From Ukraine as EU Imposes Sanctions

Stocks are having a very good day as Dow wants to set another record high.  But there is no special good news driving the rally.  Instead, mostly optimism about the US economy.  This week there will be reports on retail business.  Maybe today's rise is another one of those days to buy on the rumor & sell on the news.

Dow Jones Industrials

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