Opening Bell: 10.07.13

Opening Bell: 10.07.13

A U.S. Default Seen as Catastrophe Dwarfing Lehman’s Fall (Bloomberg)
Failure by the world’s largest borrower to pay its debt — unprecedented in modern history — will devastate stock markets from Brazil to Zurich, halt a $ 5 trillion lending mechanism for investors who rely on Treasuries, blow up borrowing costs for billions of people and companies, ravage the dollar and throw the U.S. and world economies into a recession that probably would become a depression. Among the dozens of money managers, economists, bankers, traders and former government officials interviewed for this story, few view a U.S. default as anything but a financial apocalypse.

Boehner Says House Won’t Vote on Clean Debt Limit Bill (Bloomberg)
U.S. Speaker John Boehner said the House can’t pass an increase to the U.S. debt ceiling without packaging it with other provisions — something President Barack Obama has labeled a nonstarter. “We are not going to pass a clean debt limit,” Boehner said yesterday in an interview on ABC’s “This Week” program. “The votes are not in the House to pass a clean debt limit.” Boehner said he thinks the U.S. could end up in default if Obama doesn’t negotiate. “That’s the path we’re on,” he said…While Obama will negotiate on budget details or to strengthen the Affordable Care Act, he “is not going to sanction negotiations with any faction that are using the threat of default as a way of extracting policy in our democracy,” Gene Sperling, director of the president’s National Economic Council, said at a breakfast today sponsored by Politico.

Greek Budget Sees End To Six-Year Recession Next Year (Reuters)
Twice bailed-out Athens also confirmed it would post a budget surplus before interest payments this year for the first time in over a decade, and its battered economy won a vote of confidence from billionaire U.S. investor John Paulson…U.S. hedge fund group Paulson & Co said it expected the protracted recession to bottom out this year, making Greece’s recapitalized banking sector an attractive investment play on the country’s recovery after a deep six-year slump.

Buffett’s Crisis-Lending Haul Reaches $ 10 Billion (WSJ)
The latest windfall for the Omaha, Neb., billionaire and his conglomerate, Berkshire Hathaway Inc., came when candy maker Mars Inc. repaid $ 4.4 billion that its subsidiary, Wrigley, borrowed in 2008. That payment alone is expected to net Berkshire a profit of at least $ 680 million…Besides Mars and Bank of America, Berkshire made investments in Goldman Sachs Group, Swiss Re Ltd., Dow Chemical Co., and General Electric. Several deals are continuing to pay hefty dividends. Berkshire also owns equity stakes in the firms, or warrants to buy them, that add several billion dollars more to the company’s return on investments, at least on paper.

Cinnabon President Worked As As Hooter’s Waitress (NYP)
Cinnabon’s 35-year-old chief, Kat Cole, has always worked on the naughtier side of the food industry. Before being named Cinnabon president three years ago, where she oversees a business with $ 1 billion-plus in sales, she worked at Hooters in Jacksonville, Fla., when she was still in high school. At 16, wanting to earn money to buy a car, Cole greeted Hooters customers at the door and cleared tables.
At 18, Cole became a Hooters Girl, dressed in tiny orange shorts and a revealing top, serving beer and chicken wings. She became a Hooters bartender, then a manager trainer, and started work on a college degree in engineering. Hooters then asked the 20-year-old Cole to open franchises around the world. Such was the start of a 16-year career at the bawdy restaurant chain, where she ultimately became an executive vice president. One of the biggest lessons she learned from the experience was to never try to hide what makes a company unique. “The central piece of the business model was the girls,” Cole says. “You can’t ever try to hide it, or say, ‘Come to Hooters, it’s all about the food.’ The fact is, the focus was the Hooters Girls, and that is what made it special.”

Moody’s CEO: US default ‘extremely unlikely’ (CNBC)
“It is extremely unlikely that the Treasury is not going to continue to pay on those securities,” Moody’s CEO Raymond McDaniel said in an interview with CNBC. “Hopefully it is unlikely that we go past October 17 and fail to raise the debt ceiling, but even if that does happen, then we think that the U.S. Treasury is still going to pay on those Treasury securities,” he added.

Gold Befuddles Bernanke as Central Banks’ Losses at $ 545 Billion (Bloomberg)
Bernanke, who holds economics degrees from Harvard College and the Massachusetts Institute of Technology and led the Federal Reserve through the biggest financial disaster since the Great Depression, told the Senate Banking Committee in July that “nobody really understands gold prices and I don’t pretend to really understand them either.” Central banks, which own 18 percent of all the gold ever mined, will add as much as 350 tons valued at about $ 15 billion this year, the London-based World Gold Council estimates. They purchased 535 tons in 2012, the most since 1964. Russia is the biggest buyer, expanding reserves by 20 percent since prices reached a record $ 1,921.15 an ounce in September 2011. Gold slumped 31 percent since then.

Investor Trying To Pry Pepsi From Its Snack Business (NYP)
Nelson Peltz is nothing if not persistent. Months after a mainly solo effort to get PepsiCo to split its snacks business from its beverage unit so it could then buy Mondelez failed, the activist investor appears to be tilting at the same windmill, sources tell The Post. Peltz’s Trian Fund Management has reached out to some of PepsiCo’s largest shareholders in the last several weeks to gauge how much support there is for such a move, these sources said. If he finds support, Peltz may even attempt to gain a PepsiCo board seat, sources familiar with effort said.

Buffalo neighbors miss crack-dealing grandmother (NYDN)
Theresa Anderson controlled the drug game for a dozen years on Buffalo’s East Side, presiding like a godmother over a pair of poor streets. “I miss Theresa, I really do,” neighbor Debra Walker said. “I actually felt safer. Now my place has been broken into.” Anderson, 58, bought up at least 10 houses in the crumbling neighborhoods along Swinburne and Deshler streets, and operated a bustling crack trade with the help of her many relatives. Federal prosecutors said the family trampled rival dealers through violence and intimidation, but neighbors said organization also kept the area clean and safe for the people who lived there. Neighbor Deanna Gresko said Anderson wasn’t a “gang-banger drug dealer who would threaten you.”



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