Sunday, February 10, 2008

Pound to Get Pounded

I wanted to revisit my visit with Fortune Brands about a month ago. As I said then, be on the lookout for their Jan. 25 forecast. A prime example of another good company being hit hard by sub-prime. They are selling booze better than ever, golf clubs are still moving, but their exposure to homebuilding (Moen) has stopped the company's growth and forced them to lower forecasts. They earned $201.5 million, or $1.28 a share, down almost 22% from $257.6 million, or $1.65 a share, a year earlier. They went on to say that, "the home products unit could only "outperform [a] challenging market."

Hey, at least there's some honesty there. There are other companies with no product exposure to housing who will still lose money as a result of sub-prime. The reason? Greed, of course. Looking to boost investment returns, some companies bought into sub-prime securities to increase interest gains. How's that working out? Let's see.....

Mary Thompson of CNBC reports "these firms bought auction-rate securities — bonds created from pools of long-term debt. They don't pay a fixed rate, rather a lower, rolling rate that's reset through a Dutch auction every 28 to 35 days." Companies who lost their bets include Bristol-Myers and US Air, with writedowns up to $275 million dollars. Nice job putting your cash to work.

Next stop, Europe, where higher interest rates will prevent the huge inflation we'll see next year and beyond as Bernanke allows us to relive the Japanese implosion of the 90s, but at the cost of market hatred. By popular demand, I'll post my congressman's email and phone below so anyone living in my hood can berate a sub-prime bailout plan.

Alcee Hastings: Tel: (561) 684-0565, email at website

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