Trader Talk

New Year Trends


After starting off the year with a bang, the trend has been to the downside and is again this morning.

The good news is that the credit market is continuing to improve, with lower Libor and a corporate bond market that is starting to look functional again.


1) Healthcare purchase: Eye care company Advanced Medical Optics is being bought by Abbottfor $2.8 billion ($22 a share) in cash, a nearly 150 percent premium to its Friday closing price of $8.85. Separately, Abbott reaffirmed its 2008 guidance and gave 2009 guidance of $3.65 to $3.70 (analyst estimate $3.66)

2) Restaurant chain Landrys has announced that it will not be going private, and will instead pursue alternative financing for $400 million in senior notes. The refinancing should close prior to the end of February 2009. The company had been slated to be taken private by its founder, Tilman J. Fertitta. The buyout offer was $13.50 a share, the stock closed Friday at $12.35, now trading at $7.99 pre-open, down 35 percent. The company says the deal fell apart when the SEC required the company to disclose certain information from a commitment letter issued by the lead lenders, which the lenders refused to allow to be disclosed.

3) Alcoa down 5 percent pre-open, as are other aluminum stocks like Aluminum Corp. of China. Alcoa starts off the earnings parade after the close. The problem is simple: aluminum prices have been cut in half, going from roughly $1.50 a pound to $0.72 a pound in 6 months. Their earnings are closely correlated to this number. If it stays down here, Alcoa will again be forced to cut production.

After the close on Friday, Deutsche Bank downgraded Alcoa to sell, reducing 2009 earnings estimates to a loss of $0.15, from a gain of $1.50.

4) Most large commodity stocks are also trading down 2 to 4 percent. Chinese officials have said it would be difficult for China to reach its minimum 8% GDP target rate in 2009.

5) Bottom fishing: T Rowe Price is starting up a Strategic Income fund which will go after everything everyone else is running from: junk bonds, mortgage-backed securities and emerging market debt, according to the WSJ.

    • Citi Could See $3 Billion From Smith Barney Deal



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