Goldman Sachs sees $2 trillion credit drought
Investment bank Goldman Sachs predicted that fallout from the global credit slump could reduce lending by $2 trillion, raising the risks of a “substantial recession” in the U.S. The estimate was based on a “back of the envelope” calculation that financial firms could lose $400 billion tied to home foreclosures. (Bloomberg) Firms have already warned of about $30 billion in mortgage-related write-downs in the fourth quarter, following $44 billion in the third. (AP in Today, Belgian lender Dexia reported a 28 percent drop in profit due to credit-related write-downs. “Global money markets appear to be crunching up again,” said UBS economist Andrew Cates. (MarketWatch)
Military air routes opened for Thanksgiving travel
President Bush announced a series of measures to minimize air-travel delays around Thanksgiving, including opening up two restricted military air routes on the East Coast to passenger jets. He also set a moratorium on all noncritical air-related maintenance between the Wednesday and Sunday bookending Thanksgiving. (AP in Airlines expect to transport 27 million passengers over the 12-day Thanksgiving travel period, which starts today. Aviation analyst Michael Boyd said opening extra airspace won’t help much. “Airlines today use 3 percent of the sky.” he said. “We keep them in nice little rows all backed-up with each other.” (The Washington Post)
Starbucks hit by stagnant traffic
Starbucks shares fell 8 percent in extended trading after the coffee purveyor reported a 35 percent jump in profits but flat customer traffic. (MarketWatch) The 1 percent drop in U.S. customer transactions was Starbuck’s first-ever decline in traffic; same-store sales rose 4 percent. “This frankly proves there are no sacred cows in the retail world right now,” said William Blair analyst Sharon Zackfia. (Reuters) To boost customer visits, Starbucks launches its first TV ad campaign today. Starbucks raised prices by 9 cents in July, which analysts say pushed customers to McDonald’s and Dunkin’ Donuts. High milk prices also hit its bottom line. (Bloomberg)
Banking on future words
As the Hollywood writers strike drags on, some A-list writers are easing the financial sting by selling stakes in their future earnings. Content Partners, a year-old company bankrolled by billionaires Mark Cuban and Todd Wagner, pays cash for a share of future profits—but only for writers expected to draw $3 million from established TV shows, movies, and recordings. Still, Content Partners is taking on some of the risk from writers (no paycheck from online content) and studios (piracy). “It’s a market—it’s like a real estate deal,” says company co-chairman Paul Wachter. “At the end of the day, one guy wins a little and one guy loses a little.” (USA Today)