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Pisani: Social Security as Deficit Target

Tuesday, 23 Mar 2010 | 10:46 AM ET

How do you shrink the deficit now that Medicare and Medicaid are "off the table for deficit reduction?" By taking on benefits in the second biggest entitlement: Social Security.

Or at least that's what the New York Times is suggesting, in a front page story which is being widely passed around on trading desks. The idea: a combination of reduced benefits and higher taxes on Social Security is a likely target. Bottom line: forget retirement at 63 or 66; we are all going to be working into our 70s.

Chicago Federal Reserve Bank President Charles Evans, speaking in Shanghai, said he strongly supported maintaining the current accomodative monetary stance as long as inflation remained under control.

The dollar is up again today; it is near a 10-month high against the euro.

Elsewhere:

1) KB Home reported a wider than expected loss of $0.71 (loss of $0.42 consensus). Good news is that inventory impairments and land option contract abandonments decreased 59 percent compared to the same period last year.

The bad news is that sales really aren't improving much: net orders increased only 5 precent. While noting that they are likely to return to profitability later this year, CEO Jeffrey Mezger said, "we do not yet see, in many respects, a sustained nationwide recovery."

Lennar , Ryland up a couple percent in pre-open trading; KBH down fractionally. Lennar reports tomorrow.

February existing home sales out at 10am ET today.

2) Saks is up 6 percent after being upgraded to "overweight" by JPMorgan on optimism over continuing top line growth and improving margins. Already at a 1.5-year high, shares of Saks have already grown nearly 5-fold since hitting their low of $1.50 last March.

3) Walgreen is up 2 percent despite missing Q2 earnings estimates by a penny as a mild flu season hurt sales. Same-store sales fell 0.2%, weighed down by a 1.6 decline in general merchandise sales. That was offset by a small 0.6 percent rise in prescription comps due to more prescriptions being filled.

The drugstore chain sees organic sales growing between 4.5 percent and 5 percent this year and between 2.5 percent and 3 percent each year beginning next fiscal year.

4) Time Warner is reportedly the front-runner in bidding for Hollywood studio MGM. Neither company has confirmed the reports, but bids are expected to fall between $1.2 billion and $1.5 billion. However, that's far below what MGM is seeking as it currently owes about $4 billion to its lenders. The reports suggest that two other firms including Lions Gate Entertainment and Access Industries may still be in the running.

5) Generic drug maker Perrigo announced it will acquire privately-held PBM Holdings, which makes private-label baby food, for $808 million in cash. The deal should close by the fourth quarter and is expected to be accretive to earnings by next year.

Following Phillips-Van Heusen's deal for Tommy Hilfiger last week, this deal is yet another encouraging sign for the M&A market. Companies appear to be more willing to complete more highly-leveraged deals. Perrigo will fund the deal with just $175 million in cash. As for the rest, $300 million will be financed by existing debt agreements, while another $350 million will be raised from new loans.

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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