Stocks show only modest weakness, despite concerns over swine flu. Airlines, hotels, cruise ships and some food processors are down, but the overall market is only fractionally to the downside.
Why? Because after an initial panic Sunday traders have concluded that swine flu is a non-recurring event, which is unlikely to have a long-term impact on the economy.
This view, however, could change if the situation deterioriates dramatically.
Meanwhile, we are closing out the month in a few days, and stocks are up for the second month in a row:
S&P 500: up 7.9 percent
NASDAQ: up 10.3 percent
While most of the gains for the month came in the first half, both the S&P and the NASDAQ are on the verge of breaking out to multi-month highs.
This wasn't in the bears playbook; we were supposed to sell off in the middle of earnings season.
Remember this simple mantra: after the gains since the bottom on March 9th, sideways or up is a victory for the bulls.
GM: bondholders seethe.
Here's who would own what of GM's common shares under the latest GM proposal:
Government 50 percent
Unions 39 percent
Bondholders 10 percent
Current shareholders 1 percent
Two issues are on everyone's mind:
1) Will the bondholders accept an all-equity bond exchange? The unions are on board, but 90 percent of the bondholders have to approve the deal by the May 26th deadline.
Many traders think it would be better to hold out for bankruptcy.
Why? Because bondholders feel they are getting the short end of the stick. Bondholders are being asked to exchange $27 billion in debt for 10 percent of the company; the unions are getting $10 billion in cash (half of the $20 billion they are owed) AND a 39 percent stake in the company.
Most analysts feel the same way. Brian Johnson at Barclays said "the offer is unlikely to be accepted by bondholders, who are in effect being asked to sacrifice most of their claims in order to help GM satisfy commitments to the UAW."
John Murphy at Bank of America/Merrill Lynch, who said back in November that bankruptcy was the most likely outcome for GM, repeated that assertion this morning.
2) Is the latest GM restructuring more realistic than the prior plans? On the surface, it certainly appears to be: the last plan in February assumed they would be breakeven at 15 million in seasonally adjusted annual car sales; this one assumes 10 million would be breakeven.
Hardly discussed is whether the new core strategy of concentrating on Chevy, Cadillac, Buick and GMC will work; most analysts believe they should concentrate on at most 3 brands.
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