Investors Await Confidence Boost

Michael Bowler | RSS | Mon, May 25 2009 | 1 Comment

The United States is entering a much needed economic recovery. The worst of the recession is over. (Keep an eye out for articles this week detailing why that assertion is correct.) Unfortunately, the economic mood deteriorated last week as investors began to question whether the recent rally was premature. They were also warned about British government debt that raised concerns about how much money the U.S. government owes, mixed with the longstanding concern that we are borrowing entirely too much money from China and other countries.

As stocks rallied, starting in early March, investors were able to find signs of hope in reports that showed a still struggling economy. As the rally is slowing down, investors are rather uneasy going into this trading week, which will see through to two reports on April home sales and the latest assessment of consumer confidence. Combine that with a potential June 1 Chapter 11 bankruptcy filing by General Motors, and you have investors all over the country ‘sitting on pins and needles’.

What is scaring investors right now is the amount of jobless figures that are still going up. What investors fail to realize is that there are two kinds of economic indicators: leading and lagging. Leading indicators are economic actions that foretell an upward moving economy. Lagging indicators are economic actions that react slowly to economic changes, therefore leaving no predictive value. Jobless figures are a lagging indicator due to the fact that jobs are not created by most companies until capital is obtained or accounted for that support them.

Jobless figures are not going to go up until all the leading indicators, which are very strong right now, manifest themselves in the way of solid economic recovery. Economic recovery can and will not happen quickly because a strong recovery happens slowly as a solid foundation is formed under each step. The economy will waver a little with each rally followed by a short decline as that slow recovery has solidarity formed under it. You are also guaranteed to see a few more struggling businesses, especially in the financial market, hit Chapter 7 bankruptcy, liquidate, and be swallowed up by stronger businesses. When that occurs, there is nowhere to go but up because there are fewer weak businesses to slow down and weaken the recovery.

Major leading indicators squeezed out a gain last week. The Dow Jones industrial average rose 0.1 percent, while the Standard & Poor’s 500 index ended the week up 0.47 percent. The first test of ability to build on these gains comes Tuesday, when the Conference Board releases its May consumer confidence index which should provide some insight into consumers’ willingness to spend. Ron Weiner, president and chief executive of RDM Financial in Westport, Conn., says that while any positive news about consumers would be welcome, the market is likely to have just a short-term upward movement. “We want the consumer to be out there, we want them to spend,” Weiner said. “For the most part, however, we don’t see consumers going to pull us out of this economy because they are also paying down debt at the same time.” Investors are also concerned about retail due to the Commerce Department’s disappointing retail sales report for April, which took the market by surprise May 13 and sent stocks plunging.

Analysts say more stabilization in the housing industry is needed for a recovery to occur. A government report is also due this week on U.S. home prices during the first quarter of 2009. The housing data could be a big force in shaping investors’ attitudes. A housing recovery is crucial to helping boost consumer confidence and to allow banks to put aside some worries about eroding asset values.

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Tags: economic recovery, government debt, jobless figures

Capmark Financial Group faces bankruptcy

Jennifer McClelland | RSS | Sat, Apr 25 2009 | 0 Comments

Facing a deteriorating global economy Capmark Financial Group, commercial real estate lender and investor, posted a $1.1 billion fourth quarter loss (as opposed to the fourth quarter loss of $11.2 million in 2007). If due dates for loans are not extended, the company may have to file for chapter 11 bankruptcy protection.

Capmark asked the U.S. Securities and Exchange Commission for a 15-day extension to file its annual report earlier this month. The Horsham, Pa.-based company said it needed the extension because of the substantial time it has dedicated to negotiating with its lenders to obtain amendments to its bridge loan agreement and senior credit facility “as well as the uncertainty and range of potential outcomes of these negotiations.”

In light of market conditions and Capmark’s recent estimated operating results, it said it has began discussions with lenders under its senior credit facility, where it expects to request modifications to certain terms of both its senior credit facility and bridge loan agreements. Capmark warned there is no assurance that it will be able to reach agreement with the lenders.

Earlier in the week about 94% of lenders of outstanding loans from Capmark’s bridge loan agreement said that they would extend the maturity date of the bridge loan to May 8th. If the lenders can’t extend the loans further, Capmark will have to file for chapter 11.

Source

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Tags: chapter 11 bankruptcy protection, commercial real estate lender, horsham pa

Spectrum Brands lowers 2009 net income predictions

Jennifer McClelland | RSS | Fri, Apr 10 2009 | 1 Comment

Spectrum Brands makes Rayovac batteries, Remington grooming tools, and insect repellents under the name Hot Shot, Cutter, and Repel.

The company filed for Chapter 11 bankruptcy protection in February and is now lowering its net income predictions for 2009 by 23%. It expects to earn $30 million this year instead of the $39 million it expected earlier this year.

It also posted a loss of over $100 million for the first quarter 2009.

All of Spectrum Brands’ major performance measures have declined between the initial February projection, and the amended figures released April 10.

Revenue growth, now pegged at $2.2 8 billion for this year, is expected to decline one percent between 2009 and 2010. Initial projections estimated 2.2 percent growth from 2009 to 2010.

The company also project margins on cost of sales, now at 37 percent, and operating expenses, now at 12 percent, to be lower than initial estimates of 38 percent and 13 percent, respectively.

Source

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Tags: rayovac batteries, chapter 11 bankruptcy, grooming tools