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30 October 2008
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U.S. Federal Reserve Lowers Interest Rates to 1.0% The Washington Post, 29 October 2008 The Federal Reserve announced its decision to cut interest rates by half a percentage point to loosen the flow of credit and head off the economic disaster. The move leaves policy makers with less room to maneuver if the economy deteriorates further. Stocks fell sharply following the announcement. Related News: White House Tells Banks to Start Lending (Newsweek, 29 October 2008) |
Our view: With banks reluctant to lend, it remains to be seen if lending will become cheaper for businesses. Provide your board, shareholders, suppliers, and customers with frequent updates on the evolving global financial situation and its impact on your firm. |
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Economic Conditions Changing the Course of Deal Making The New York Times, 29 October 2008 Private equity firms and other buyers are staying mum about deals longer, leaving shareholders in the dark as buyers attempt to drive deals. Buyer leverage these days is bound to be replaced by a seller backlash when the market returns to certainty, according to Times's Steven Davidoff. |
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“Heard in the Suite” —Price Increases Still a Concern, Even in Light of Declining Commodity Prices This feature highlights member quotes that represent emerging trends, challenges to conventional wisdom, and underreported news. Procurement executives continue to worry about price increases and inflation in 2009, despite the significant decline in commodity prices in the past two months. Due to periodic pricing, suppliers’ 2009 listings reflect inflation from the past year, plus a risk premium for potential inflation in the coming year. In addition, executives recognize the increased scarcity of raw materials. As one global energy company has noted, “There are three truths: 1) global energy consumption will increase; 2) global oil production will decrease; and 3) carbon consciousness is here to stay." |
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Should Companies with an Abundance of Real Estate Spin Off Land? Bloomberg, 29 October 2008 Bill Ackman, the activist hedge-fund manager and major shareholder of retailer Target, believes that the company would create immense value by spinning off to shareholders a real estate investment trust that owns the land beneath Target's stores. This approach would allow Target to generate more cash flow and pay down its debt without raising money through the credit markets, Ackman said. |
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Biotech Firms Hit Hard by Financial Crunch The Wall Street Journal, 29 October 2008 The financial crunch is threatening to slow research and development and cut high-tech jobs in the United States and Europe. Many small biotech companies are operating with less than a year's worth of cash, and their demise would be a blow to big pharmaceutical companies that rely on start-ups to invent new products. |
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Daily Capital Markets Review: Rate Cut Overshadowed by Weak Profit Outlook Corporate Executive Board, 29 October 2008 This summary includes news items regarding global liquidity, the TED spread, commercial paper and T-bill rates, currencies and commodities, and corporate debt spreads and new issuances. If you would like to receive the Review after markets close (instead of the next morning), please click here. |
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