Well, Greece got what it wanted from powers that be earlier today. The embattled euro nation received nearly $45 billion in new bailout finds, rate cuts on loans, and suspended interest payments for up to 10 years. Yet the market just yawned at the news, so the bailout was likely already priced in. Have we finally seen an end to Greek bailout announcement rallies? It could be if today’s failure to bounce was any indication.
In big M&A news, ConAgra Foods (CAG) was finally able to get Ralcorp (RAH) to accept a buyout offer, ending an 18-month courtship. Investors liked the news for ConAgra shares, which ended up by nearly 5%. Elsewhere, special dividend announcements helped shares of Las Vegas Sands (LVS) and Brown-Forman (BF-B) gain some traction. Finally, cautious Wall Street commentary had shares like National Oilwell-Varco (NOV) and Baxter International (BAX) in the red. On the flipside, Corning (GLW) gained on the back of positive analyst chatter. Merck (MRK) closed down despite news the company was bumping up its dividend payout ever so slightly – 2.4% increase.
In yesterday’s New York Times, the media’s favorite investing tycoon, Warren Buffett, downplayed the nervousness surrounding an increase in the capital gains tax rates on the overall investing landscape. He argued that human nature dictates wealthy investors will always being on the prowl to grow their money, regardless of where tax rates may be at the time (and I agree with him). Now, Mr. Buffett has gone on record as asking Washington to tax him more, so I understand his wanting to reiterate his “the world will go on no matter what happens to taxes” stance.
Getting out of the markets completely almost never makes sense, and even when the market was melting down in late 2008, we had a small list of great income-producing names that made it through the worst of times. Endless media chatter about fiscal cliff is more of a smokescreen in our eyes. It just distracts investors from the real issue: corporate earnings. We continue to see the job market deteriorate, with lower salaries and more layoffs as the new norm.
For a truly sustainable economic rebound to take place, the jobs picture absolutely must firm up first. There are inflationary costs being passed on to consumers all over the place, while salaries are going in the opposite direction. At some point, the lack of wage growth has no other implication than simply choking off the ability of people to spend. Unless Washington starts giving us spending vouchers aside from what assistance many are already receiving, all the bubbly chatter may start coming to a halt.
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