March Madness

March 12, 2012

Futures are down this morning after another weak economic report from China as the country’s trade deficit was the largest since 1989. In a separate note, the Washington Post is reporting that US exports of commodities, vehicles, commercial aircraft, and pharmaceutical products have helped to increase exports to China by 50% since 2008.

Med tech stocks are up this morning after Asahi Kasei announced plans to acquire Zoll Medical (ZOLL) for a 24% premium over Friday’s close. The deal, valued at $2.2 billion, is priced at 23x estimated 2012 EBITDA.

Logic has prevailed in one part of the Greek credit crisis-CDSs. The ISDA determinations committee has concluded that Greece defaulted and has triggered the credit default swaps on its debt. The contracts are expected to settle next week. Last week I incorrectly stated there were $3.2 billion in CDS on Greek debt, but the number is much higher. The $3.2 billion figure is the net exposure of all the issuers of the swaps.

Gas prices are still going up. Check out the prices at our local Mobil station:

The ink is barely dry on the Greek deal, and now both German and ECB officials are discussing the probability of a third bailout.

The Fed meets this week, and while no changes are anticipated in the committee’s position, analysis of post-meeting comments will focus on any changes to their plans to hold rates near zero until 2014. Additionally, observers will be looking for signs the central bankers are considering another round of quantitative easing.

Feeling pressure to continue driving earnings growth, US corporations are looking for relief from pension contributions. Citing low market returns that have contributed to underfunded pensions, the companies are citing the hit to earnings of the contributions. The companies really need to look at their return assumptions as the average S&P 500 company with a pension plan has an annual return assumption of 8.3%.

March Madness kicks off this week. This is the biggest week of the year for office pools and lost productivity related to sports.

Have a great day

Ned