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It’s no accident that Austrian economics is newly popular. It provides the best explanation for the business cycle we just lived through.
But the resurgent popularity of Austrian economics may actually be hampering the ability of the Federal Reserve to reflate the economy with low interest rate policies. Businesses, now aware of the dangers of a low inflation- sparked economic bubble, may simply be refusing to fall for the age-old boom-bust trap.
The Austrian theory of business cycles is rather straightforward:
*Update: Janus has resumed trading, as of 2:40*
*Update: MFS tells us that they have not received any request for information in connection with the federal insider trading probe.*
Trading in shares of the Janus Capital Group have been halted, apparently in anticipation of an announcement that federal authorities are looking at Janus as part of their insider trading dragnet.
What a strange love affair it's been between TPG Capital and J. Crew.
This morning the news broke that TPG Capital, with help from a Los Angeles private equity firm called Leonard Green & Partners, is close to a deal to acquire the preppy-clothing company for about $3 billion in cash, or around $43.50 per share. This news comes just 18 months after TPG Capital sold off the last of its previous stake in J.Crew at an average price of $14 .
The turnabout, while continuing a convoluted TPG/J.Crew affair, also may speak volumes about the state of private money today.
TPG first acquired a stake in J.Crew way back in 1997. It was one of the private equity firm’s first and most notable deals. Back then J.Crew was a huge brand, with a highly recognizable name and look, but with sales of just $600 million per year. In the catalogue business, Eddie Bauer and Land’s End have sales more than twice J. Crew’s. Banana Republic dwarfed it in brick-and-mortar retail.
Perhaps even more importantly, J. Crew’s management—primarily the founder Arthur Cinader and his daughter Emily Woods—had an uppity reputation that had reportedly already scared off one buyer, Bahrain’s Investcorp.
The original deal was messy. TPG and J. Crew had agreed to a sale price of $560 million, financed with $175 million in senior subordinated notes with a 10 percent yield and $140 million in zero-coupon junk bond notes offered at 54 cents on the dollar. Chase would finance about $30 million in receivables.
It appears Blackstone will not succeed in its buyout attempt of Dynegy, the Houston energy company specializing in power plant operations.
In reference to a meeting discussing the proposed takeover, The Journal writes:
"The meeting was recessed a week ago to give shareholders time to consider a revised offer Blackstone made. Facing intense opposition from Carl Icahn and hedge-fund operator Seneca Capital, Blackstone raised its bid to $5.00, a 50-cent increase over the August merger agreement, in an attempt to sweeten shareholder sentiment. "
But to no avail.
And the opposition of Icahn, as well as Seneca Capital, was indeed the rub.
Over the weekend, we learned that the federal government has gone into panic mode over insider trading. It is using the kind of tactics developed to fight mobsters, and later, terrorists, to root out and punish the use of non-public information by hedge fund traders. It's the equivalent of TSA Rapiscan body scanners or invasive pat-downs at airports.
Does this make sense? Mobsters and terrorists have genuine victims, often easily detectable by their corpses; while the victims of insider trading are far harder to detect. That should be the starting place in any story about government enforcement; who is the victim? When it comes to insider trading, the victim is so hard to detect that it's far easier to suspect that it may not exist. The victim of insider trading is a Snuffleupagus, someone visible only to the Big Birds behind government desks.
During this time of year, we'll read and hear lots of stories on the pulse of the consumer with interviews from retail CEOs as well as analysts. But another indicator on the overall health of the retail sector is the REITS that acquire, own, develop, redevelop, manage or lease regional and community shopping centers.
The occupancy of these REITs tell you just how robust the industry is performing—is it contracting or expanding? One of companies in this space is The Macerich Company \(MAC\) which owns approximately 73 million square feet of gross leasable space with primarily interests in 71 regional malls throughout the United States. Art Coppola, Chairman and CEO of the company tells me this holiday season could be a very merry one for the retail industry.
World markets are sharply lower this morning. The selloff appears to have been triggered by two principal factors: Worries about a worsening debt crisis in Europe, and North Korean shelling of a South Korean island.
Here are the raw data: (From Yahoo Finance via AP) "In Europe, the FTSE 100 index of leading British shares was down 35.77 points, or 0.6 percent at 5,645.06 while Germany's DAX fell 16.76 points, or 0.3 percent, to 6,805.29. The CAC-40 in France was 30.16 points, or 0.8 percent, lower at 3,788.73."
"Wall Street was also poised to open lower—Dow futures were down 61 points, or 0.6 percent, at 11,104 while the broader Standard & Poor's 500 futures fell 9.2 points, or 0.8 percent, at 1,188.70."
North and South Korea Fire Artillery in Anger
North Korea and South Korea have exchanged artillery fire after the North shelled a South Korean island with artillery rockets near the two countries disputed maritime border. This is an international incident of a serious magnitude, with ramifications for both the regional markets in Asia, as well as for the broader global financial markets.
The New York Times provides a timeline, as well as a context for the hair-trigger potential for escalation on the Korean Peninsula:
The surging power of activist investors is bolstered by a growing ally: public pensions and other big institutions.
Crude oil futures fell sharply, signaling traders that the selling is not over.
The Fed gave banks more time to meet a provision in the Volcker rule that bans them from betting with their own money through investments in risky hedge and private equity funds.