Financial News

[southsider2k5]

So yeah that's what I think I was getting at, why would they want to yank the rug out from under the dollar? They would lose a ton of money. Is that just them trying to get our government to spend responsibly?

 

Yep. For better or for worse, China's existence is based on the US. They are afraid of the US running the dollar into the toilet with their policy, and are trying to make noise to get them to shore it up.

[lostfan]

And if our currency collapses then labor here would become cheaper than there (what I meant by the yuan appreciating, but I guess that was the wrong way to say it), plus we wouldn't be able to buy all of their cheap exports.

[southsider2k5]

And if our currency collapses then labor here would become cheaper than there (what I meant by the yuan appreciating, but I guess that was the wrong way to say it), plus we wouldn't be able to buy all of their cheap exports.

 

That too. They would lose a lot of their competitive advantage if the Yuan appreciated significantly versus the dollar. They would lose both the labor advantage, and directly because of that the pricing advantages, depending on how much of a move we are talking about here.

[lostfan]

This article is a little stale but it's a commentary on the performance of TARP: http://www.newsweek.com/id/214096

 

Basically the capital investment part of it is probably going to turn a profit as was hoped for. The rest of it (loans to AIG, GM) is more likely to end up in a black hole.

[NorthSideSox72]

In the DOOM DOOM DOOM category, a couple big name businesses are about to go away...

 

The Chicago Sun Times' offer of purchase from the Tyree group expires today - so unless the union suddenly changes its votes on the deal, that will fall through. Rumors are there is some other entity kicking the tires, but no offer yet. Sun Times is running out of cash, and according to the most recent articles, they will reach a point where they don't even have enough money to shut down within days. So there is about a 95% chance that the Sun Times will cease to exist very soon.

 

GM has also announced that the plan to sell Saturn to the Penske Group has fallen through. Saturn will be shut down, by this time next year, with manufacturing stopping well before that, unless someone else can come to the rescue soon. Saturn employs at least 13,000 people (that's how many they intended to save with the sale, they probably employ more than that).

 

[southsider2k5]

I couldn't believe that the ST people rejected the new terms to keep it open. A pay cut is better than no job at all IMO.

[NorthSideSox72]

I couldn't believe that the ST people rejected the new terms to keep it open. A pay cut is better than no job at all IMO.

Yeah, that was pretty much throwing out the baby with the bath water. Career suicide. Not like there are a ton of other jobs out there in that sector, which is already shrinking pretty rapidly.

 

I suppose with the demise of the Sun Times, that should help the Trib, but I'm not sure it would help enough for the Trib to do any major new hiring.

 

Its possible that TribCo may consider buying some of the suburban papers that make money, though.

 

[southsider2k5]

Yeah, that was pretty much throwing out the baby with the bath water. Career suicide. Not like there are a ton of other jobs out there in that sector, which is already shrinking pretty rapidly.

 

I suppose with the demise of the Sun Times, that should help the Trib, but I'm not sure it would help enough for the Trib to do any major new hiring.

 

Its possible that TribCo may consider buying some of the suburban papers that make money, though.

 

I guess they really believe that they won't let them shut it down, but evidence all across the country tells me otherwise. Its not a gamble worth making in an industry that is shrinking quicker than steel in the 90's.

[Texsox]

Its not a good sign for the long term viability of manufacturing. I agree there. But as you and I have discussed before, the way to cut into this is to get onto the leading edge on some things, not trying to protect aging industry in state.

 

I am weeks late coming into this but manufacturing is near and dear to me. In the "good old days" the jobs in manufacturing were well paying, middle class occupations. Now we expect those jobs to provide about the same standard of living as enjoyed by those workers around the globe in developing economies. I fear it just will not be worth saving manufacturing jobs when they will pay barely minimum wage.

[Texsox]

I couldn't believe that the ST people rejected the new terms to keep it open. A pay cut is better than no job at all IMO.

 

Has anyone seen any data on what the turn over rate is when companies have these cuts?

[southsider2k5]

Has anyone seen any data on what the turn over rate is when companies have these cuts?

 

It is a lot less than if they shutdown.

[Texsox]

It is a lot less than if they shutdown.

 

no doubt. I was just curious how companies do after they go through something like this.

 

I could see this just slowing down the inevitable. The better skilled employees bail to maintain their income, those that are left are bitter, replacement workers are not at the same caliber as those that left and are "poisoned" by the bitter employees who remained.

 

Or

 

Restructured and streamlined company returns to profitability. Those left behind realize how important it is to work hard to maintain profits. Company is a success once more.

[CanOfCorn]

I guess they really believe that they won't let them shut it down, but evidence all across the country tells me otherwise. Its not a gamble worth making in an industry that is shrinking quicker than steel in the 90's.

 

You ask any outsourcing specialist and they will say that's not a gamble to take in any industry. It's always best to have a job while you look for a better one. Suck it up, take the pay cut and start looking.

 

As an unemployee, I get real sick of stories like this or people complaining about their jobs. Because it's like life, it's certainly better than the alternative.

[Balta1701]

[southsider2k5]

21 straight months of job losses. 9.8% unemployment, and the talk around the markets is quickly getting much darker.

[NorthSideSox72]

Interesting time trend there - each recession in the last few is taking longer to recover jobs.

 

[NorthSideSox72]

21 straight months of job losses. 9.8% unemployment, and the talk around the markets is quickly getting much darker.

Yeah, this is kinda what I've been figuring, and predicting here - a correction late this year (maybe a bit earlier than I thought) as unemployment continues to flirt with 10% on either side and the special programs expire, followed by a small bounce early next year as there is less foreclosure and undersale fat in the housing market combined with stabilization in consumer spending as that goes down to match the unemployment trend. Then the big question, to me, is late 2010 - I could see it going anywhere from there.

 

And I think its really interesting that the market pundits all agree on something like this in the short term, but after mid-2010, the predictions gap out ALL OVER the place, ranging from big run-ups to huge new dips.

 

[Balta1701]

Another interesting look at the "Wall street, cancer on America's economy" setup that we keep seeing. In this case, a profitable company is bought, restructured, debt is added, the people who did the restructuring walk out with a lot of money, and then leave someone else holding the bag for all the debt that is added. Ideally, isn't this the sort of thing that capitalism is supposed to avoid? If all that a company is doing is extracting value for itself while hurting everyone else, and it is able to be successful doing that, then there's something fundamentally wrong with the system itself.

For many of the company’s investors, the sale will be a disaster. Its bondholders alone stand to lose more than $575 million. The company’s downfall has also devastated employees like Noble Rogers, who worked for 22 years at Simmons, most of that time at a factory outside Atlanta. He is one of 1,000 employees — more than one-quarter of the work force — laid off last year.

 

But Thomas H. Lee Partners of Boston has not only escaped unscathed, it has made a profit. The investment firm, which bought Simmons in 2003, has pocketed around $77 million in profit, even as the company’s fortunes have declined. THL collected hundreds of millions of dollars from the company in the form of special dividends. It also paid itself millions more in fees, first for buying the company, then for helping run it. Last year, the firm even gave itself a small raise.

 

Wall Street investment banks also cashed in. They collected millions for helping to arrange the takeovers and for selling the bonds that made those deals possible. All told, the various private equity owners have made around $750 million in profits from Simmons over the years.

 

How so many people could make so much money on a company that has been driven into bankruptcy is a tale of these financial times and an example of a growing phenomenon in corporate America.

 

Every step along the way, the buyers put Simmons deeper into debt. The financiers borrowed more and more money to pay ever higher prices for the company, enabling each previous owner to cash out profitably.

 

But the load weighed down an otherwise healthy company. Today, Simmons owes $1.3 billion, compared with just $164 million in 1991, when it began to become a Wall Street version of “Flip This House.”

 

In many ways, what private equity firms did at Simmons, and scores of other companies like it, mimicked the subprime mortgage boom. Fueled by easy money, not only from banks but also endowments and pension funds, buyout kings like THL upended the old order on Wall Street. It was, they said, the Golden Age of private equity — nothing less than a new era of capitalism.

 

These private investors were able to buy companies like Simmons with borrowed money and put down relatively little of their own cash. Then, not long after, they often borrowed even more money, using the company’s assets as collateral — just like home buyers who took out home equity loans on top of their first mortgages. For the financiers, the rewards were enormous.

 

Twice after buying Simmons, THL borrowed more. It used $375 million of that money to pay itself a dividend, thus recouping all of the cash it put down, and then some.

 

A result: THL was guaranteed a profit regardless of how Simmons performed. It did not matter that the company was left owing far more than it was worth, just as many people profited from the mortgage business while many homeowners found themselves underwater.

[NorthSideSox72]

Another interesting look at the "Wall street, cancer on America's economy" setup that we keep seeing. In this case, a profitable company is bought, restructured, debt is added, the people who did the restructuring walk out with a lot of money, and then leave someone else holding the bag for all the debt that is added. Ideally, isn't this the sort of thing that capitalism is supposed to avoid? If all that a company is doing is extracting value for itself while hurting everyone else, and it is able to be successful doing that, then there's something fundamentally wrong with the system itself.

This sort of thing is not at all new, its been going on for decades. It even happened to a company I worked for, for a long time.

 

And its not anti-capitalism at all. It even has some positive side effects in some cases. Sucks to be at a company that is the target of a leveraged buy-out, though, I can tell you.

 

[NorthSideSox72]

Congress' new crusade? They want to go after banks for charging overdraft fees.

 

I don't like where this is going, at all. These fees are 100%, clearly, the fault of the consumer, not the bank. If you spend more than you have, you get penalized - um, duh? Did we not all learn this a loooooong time ago? Hey, we've all been there, I know a couple times some number of years ago I didn't time some checks right and went under temporarily, and paid the penalties, because it was my own damn fault.

 

If Congress starts meddling here, the lost revenue from the fees will find its way to consumers elsewhere, and worse, it will hit the wrong people. People who screw up should pay, not everyone else. Really pretty simple.

 

The only thing mentioned in the article that I can agree with is, banks should not be able to enroll account holders into special overdraft or other similar "features" without their knowledge. That's fine. But I hope consumers realize that if they DON'T have that, they are STILL going to get hit with fees.

 

[Balta1701]

So you're ok with banks charging the equivalent of thousands of percent interest on overdrafts? And signing people up for the overdraft program whether they want to or not? Instead of just, you know, having the transaction be declined?

[NorthSideSox72]

So you're ok with banks charging the equivalent of thousands of percent interest on overdrafts? And signing people up for the overdraft program whether they want to or not? Instead of just, you know, having the transaction be declined?

1. I specifically said that I am not OK with the blind sign-up

 

2. Assuming people are in an overdraft program or not and should know that, I am OK with them handling it whatever way they see fit.

 

3. This isn't about interest - its a fee, and its been like that for a long time.

 

4. If I were running the bank, I'd decline it WHEN I COULD, but it is not nearly that simple. With a check, they can either overdraft you (and charge a fee), or decline payment (then you get a fee from the depositor). Either way, you get charged, and you should be. If we are talking about a debit card, then as long as the debit card can go to the account for eligible balance, then yeah, I'd have it decline if they would go under AND didn't have overdraft protection.

 

So like I said, other than blindly signing people up for something, I have no issue with it at all. And even if they are given that OD protection unknowingly, which would you rather have happen? Pay a fee, or be declined and not be able to make your purchase? Neither is a good thing.

 

[Harry Chappas]

The bigger problem is that the banks are double dipping.

 

You pay interest usually over 20% on the overdraft funds as well as the fee. Citibank hit me with the fee and I was unaware of it as they instituted the policy out of nowhere. I move the money from an interest bearing account to my 0% interest checking account weekly. Now every time I go over I get charged $10.

 

 

[Balta1701]

You do realize the scale of what we're talking about here right? It's balloned from a couple billion to about $40 billion in fees annually.

[NorthSideSox72]

The bigger problem is that the banks are double dipping.

 

You pay interest usually over 20% on the overdraft funds as well as the fee. Citibank hit me with the fee and I was unaware of it as they instituted the policy out of nowhere. I move the money from an interest bearing account to my 0% interest checking account weekly. Now every time I go over I get charged $10.

The bolded is the issue, to me.