In Between Days: Grecian Formula?

by CC October 26, 2011 11:41 pm • Commentary


Euro zone leaders and banks are close to reaching a deal on a 50 percent writedown for private bondholders on their Greek debt, an EU source said on Thursday.

Negotiations at a summit meeting of euro zone leaders were centered on agreeing a writedown or “haircut” with private bondholders on a voluntary basis.

Euro zone states want private investors to accept the haircut in an effort to reduce Greece’s debt burden by about 100 billion euros.


Private owners of Greek bonds will accept a 50 percent writedown on their investment, enabling both a 100 billion euro cut in Greece’s sovereign debts and allowing a new Greek program of aid of 100 billion euros, German Chancellor Angela Merkel said on Thursday.

“Our goal is that the debt of Greece by 2020 is 120 percent (of GDP),” Merkel told journalists after a meeting of euro zone leaders.

“A nominal haircut of 50 percent has been agreed. On the basis of this, we will have a new program for Greece with a value of 100 billion euros.”

She said the public sector would make a further 30 billion euro contribution towards private sector participation.


Big investors are showing interest in an evolving Obama administration plan to sell off foreclosed homes, although the government will have to make the offer sweet enough to coax private funds.

The White House is assessing how best to encourage private companies and investors to snap up foreclosed properties held by the government and convert them into rentals.

Officials want private partners to take over as much as $30 billion in single-family properties that are currently on the books of government-run Fannie Mae, Freddie Mac and the Federal Housing Administration.

Several money managers with large fixed income funds are interested, according to sources, and a request for ideas on how to construct a program received nearly 4,000 responses.


The S&P faltered early amidst confusing news from Europe, but the afternoon saw a rally as hopes for a workable resolution grew. The index closed the day up 1.05%.

Year-to-date the index is in the red at -1.24% and 8.92% below the interim high of April 29.

From an intermediate perspective, the index is 83.6% above the March 2009 closing low and 20.6% below the nominal all-time high of October 2007.


Amazon fell $10.46 (4.4%) Tuesday after reporting net income down 73% and offering investors the strangest guidance I’ve ever seen:

“Operating income (loss) is expected to be between $(200) million and $250 million, or between 142% decline and 47% decline compared with fourth quarter 2010.”

Apple, by contrast, is expecting next quarter’s sales to grow by at least 38%, to $37 billion.

To be sure, the two companies are in very different businesses. But they are about to compete in the tablet market — the only part of his business that Amazon CEO Jeff Bezos mentioned in Tuesday’s press release — and the contrast is striking.

Amazon will lose money on the Kindle Fire — the more it sells, the more it loses — hoping to make it up in the sale of  books, movies, music, etc.

Apple will make some money from music, apps and books, but the big bucks (and we’re talking billions) come from the sale of its high-margin hardware.

Two different business models. Both growing rapidly, both (mostly) profitable. But at Tuesday’s close, Apple’s shares (at $397.77) were selling at 14.4 times trailing earnings and Amazon’s ($227.15) were selling at 100.2.

Tomorrow’s Tape (WSJ)


At 8:30 a.m. ET we get weekly jobless claims data. Economists think claims came in at 400,000, down from 403,000 a week ago. Everybody’s talking about how this series has improved, but I feel like I’ve been writing the previous sentence every week for the past three months.

Also at 8:30 a.m. we get the first look at third-quarter GDP. Economists, on average, think growth surged to a 2.7% annualized rate, from 1.3% in the second quarter. That’s right about the trend growth rate, and a good bit better than the market feared earlier this year.


Before the bell we hear from:

  • Aetna
  • Dow Chemical
  • Zimmer Holdings
  • Motorola Solutions
  • Altria
  • Citrix Systems
  • Franklin Resources
  • Procter & Gamble
  • Hershey
  • Raytheon
  • Cameron International
  • Celgene
  • Exxon Mobil
  • Xcel Energy
  • Waste Management
  • Time Warner Cable
  • PulteGroup
  • Mead Johnson Nutrition
  • Moody’s
  • International Paper
  • Starwood Hotels
  • Goodrich
  • EQT
  • Colgate-Palmolive
  • Coca-Cola Enterprises
  • Cardinal Health

Later we hear from:

  • Precision Castparts
  • Occidental Petroleum
  • Johnson Controls
  • Bristol-Myers Squibb

After the close we get earnings from:

  • Motorola Mobility Holdings
  • Southwestern Energy
  • MetLife
  • Cerner
  • Advanced Micro Devices
  • Republic Services
  • Gilead Sciences