Rice - All-Time High

Commodities

March 26, 2008 - Rice prices jumped 30 per cent to an all-time high (doubled since January); global rice stocks are at their lowest since 1976 (foreign sales restrictions have removed about a third of the rice traded in the international market):

1) Egypt, leading exporter, imposed a formal ban on selling rice abroad to keep local prices down,
2) Philippines (world’s largest buyer of the grain) announced plans for a major purchase of the grain in the international market to boost supplies,
3) Indian government imposed further restrictions on the exports of rice to combat rising local inflation),
4) Indonesia stopped its farmers from selling rice abroad ( joined Vietnam, Egypt, China, Cambodia, India in banning foreign sales),
5) Australian rice production collapsed due to draught - down 98% since 2003

















(source: Australia wine and rice producers; New South Wales Rice Marketing Board; Australian Wine and Brandy Board)

6) April 15, 2008 - Rice futures in Chicago rose to all-time high of $22.17 per 100 pounds, up 63 per cent since January


TFC Commodity Charts
Rice (RR, CBOT)
Monthly Price Chart

(source: http://futures.tradingcharts.com/charts/RIM.GIF)

FTSE - Worst Start in History

Trading

March 31, 2008 - London’s FTSE 100 index closed at 5702.1, off 11.9 per cent for the first three months of the year = the index’s worst opening quarter since it was launched 24 years ago on January 3, 1984 (3Q 2000 -fell 20%).

Reasons - subprime crisis, slowing housing market (Building Society reported 5th consecutive drop in housing prices), consumer confidence in the UK is at its lowest for 15 years (data from pollsters GfK/NOP showed the confidence worsened for a seventh month in a row, lowest level since 1993).

(source: http://ichart.europe.yahoo.com/c/5y/_/_ftse)

Restaurants in Recession

Food Service

Convenience and enjoyment overcome fear and penny pinching. Attention to quality, price, portions and promotion means restaurant traffic does not always fall during a recession (source: NPD Group).

M&A History

Mergers & Acquisitions
Automotive

March 26, 2008 - Ford Motor Company agreed to sell its Jaguar line (acquired in 1989 for $2.38 billion) and Land Rover line (acquired in 2000 for $2.73 billion) of luxury cars to Tata Motors (India’s third-largest passenger carmaker) for $2.3 billion; ended first modern-day cross-border acquisition between United Kingdom.

From The Deal Professor by Steven M. Davidoff (March 26, 2008):
(http://dealbook.blogs.nytimes.com/2008/03/26/fords-ma-legacy)

Ford’s acquisition of Jaguar plc in 1989 was made via a cash tender offer. However, unlike in previous cross-border takeovers, Jaguar had a large shareholder presence.

Jaguar’s American Depositary Securities were quoted on the Nasdaq and registered under the Exchange Act, at least 25 percent of Jaguar’s holders were located in the United States, and Ford itself held about 13.4 percent of Jaguar’s securities.

The Ford offer was therefore required to comply with the governing takeover codes in two jurisdictions: the Williams Act in the United States; and the City Code on Takeovers and Mergers and the Rules Governing Substantial Acquisition of Securities, issued by the U.K. Panel on Takeovers and Mergers. This first attempt to harmonize the two systems was quite a nightmare, required extensive cooperation between the regulators of both nations. It involved many a late night for lawyers attempting to coordinate the process across the Atlantic — all this before e-mail became common and when phone calls were actually expensive.

It was the first true cross-border acquisition and it stirred the Securities and Exchange Commission to begin a decade-long process to adopt specialized rules for cross-border takeovers, culminating in the Cross-Border Release Exemptions adopted in 1999. Truly a landmark transaction.

Stock Market - 3rd Decade of No Gain

Trading

10-Year periods since 1925 - stocks have gained 98.6% of the time (source: Ned Davis Research);
except:
1) 1929-1942;
2) 1966-1982;
3) 1999-2008

April 1999 - S&P 500 index closed at 1362.80

March 25, 2008 - S&P 500 index closed at 1352.99 (accounts for half of $1 trillion invested in index funds); down 18.6% from October 9, 2007 high

10-Year Total Return (adjusted for dividend reinvestment, inflation) = 1.3%/year average

10-Year Annualized Total Returns (not adjusted for inflation)
S&P = 2.46%
Foreign Stocks = 7.18%
U.S. Long-Term treasury Bonds = 7.68%
Inflation-Protected Treasury Bonds = 8.42%
U.S. Small Cap Stocks = 11.92%
REITs = 14.11%
Gold = 14.51%
Commodities = 17.92%
Emerging Market stocks - 19.38%

9-Year Returns = -0.37%/year; worst performing vs. commodities, real estate investment trusts, gold, foreign stocks, U.S. Treasury bonds (up 4.7%/year, up 5.8%/year since March 2000)
8-Year Returns = -1.4%/year
(source: Morningstar Inc.)

Biggest IPO in U.S. History

Finance

Top 10 Initial Public Offerings in the U.S.:

March 18, 2008 - Visa Inc. - $17.9 billion
April 26, 2000 - AT&T Wireless Services - $10.6 billion
June 12, 2001 - Kraft Foods - $8.7 billion
November 9, 1999 - United Parcel Service - $5.5 billion
May 3, 2006 - KKR Private Equity Investors - $5.1 billion
July 1, 2002 - CIT Group - $4.9 billion
June 21, 2007 - Blackstone - $4.8 billion
October 21, 1998 - Conoco - $4.4 billion
March 21, 2002 - Travelers Property Casualty - $4.3 billion
March 27, 2001 - Agere Systems - $4.1 billion
(source: Dealogic)

Sayonara Bear Stearns

Investment Banks & Brokers

March 16, 2008 - JPMorgan agreed to buy Bear Stearns, 85-year-old, 5th largest brokerage firm (14,000 employees), for $2 a share or $260.5 million (closed at $30/share on Friday, March14); Bear was unable to meet a surge in margin calls by investors who were worried about its ability to weather the credit crunch; customers were unwilling to trade with the firm; great fear was that failure might have touched off a panic - banks and brokerage firms might have refused to lend to each other, financial system might have melted with unknown consequences for the broader economy.








Last days of trading (source: Clearstation.com)

Subprime Run on the Bank

Investment Banks & Brokers

March 14, 2008 - Lenders and hedge funds wanted their money back from Bear Stearns = capital and liquidity crisis. JP Morgan Chase (main clearing bank for Bear Stearns), Federal Reserve Bank of New York threw financial life preserver (secured line of credit) to 85-year old Bear Stearns to keep it above water for the next 28 days until it either improves its financial condition or it finds a buyer for itself. As a result, biggest one-day drop in trading history of stock of Bear Stearns, down $27 (47%, down $30.15 or 53% at intraday low); lowest close in more than 9 years (October 14, 1998); 2008 - lost $6.8 billion (66%) of its market capitalization

















In addition, Lehman Brothers announced it had secured a 3-year credit line from its banks...its stock sank 15%.

Witches Brew

Economic Indicators


March 13, 2008:


1) The Dollar ($) - The dollar fell to a record low against the euro ($1.5651) and a record low against the yen (Y99.85). March 13 - hit record low against the Swiss franc


2) Gold - March 13 - price of gold touched $1,000 per troy ounce.


3) Oil - March 13 - traded as high as a record $111 a barrel

The Day the Bubble Burst

Trading

March 10, 2000 - The Day the Technology Bubble Burst

NASDAQ Composite Index traded to an intraday high of 5132.52, closed at 5048.62, the peak of the Internet bubble; October 2002 - hit low of 1108, a loss of 78%.

(source: http://bigpicture.typepad.com/comments/images/wsj_infonasbubble0503_3.gif)

Recession 2008?

Economic Indicators - Recession?


March 7 - 2008 - The U. S. Labor department estimated the the nation lost 63,000 jobs in February 2008 =

1) most jobs lost in 5 years,
2) second consecutive monthly decline,
3) third drop in private-sector jobs, largest fall in payroll
4) number of officially unemployed has risen by 500,000
5) number of people outside the labor force (not working, not looking for a job) has risen by 1.3 million
6) median household income was $48,200 in 2006 (vs. $49,200 in 1999

The recession-dating committee of the National Bureau of Economic Research (seven academic economists based in Cambridge, MA) defines a recession as a "significant, protracted decline in activity that cuts across the economy, affecting measures like income, employment, retail sales, and industrial production," (New York Times). It is the most often cited judge of recessionary periods. It declared the last recession, which began in November 2001, in 2003.

Cash & Risk

Finance

March 2008 - Cash & Risk: Total cash held by companies in S&P 500 industrial index exceeded $600 billion in February 2008, up from about $203 billion in 1998; increased risks (currency risk, political risk, commodities shortages, new competition), increased savings (decline in capital spending on fixed assets, increased spending in R&D; cash ratio (cash, short-term investments) as % of total assets as high as in 1960s (Apple - 38% in 1988 to more than 60% in 2007; Avon Products - less than 3% in 1988 to 17% in December 2007; doubled for technology companies since 2000); net debt ratio (debt minus cash as % of total assets) - less than 0 by 2004 through 2006) = on average, cash on hand could retire outstanding debt.

(Source: Prof. Thomas W. Bates, U. of Arizona, Kathleen M. Kahle, U. of Arizona, Rene M. Stulz, Ohio State University, Thomson Proprietary Research)

Oil Prices - 2008

Oil

March 3, 2008 - intraday trading high of $103.95 per barrel on Mercantile Exchange.