Securities go nowhere, CVS moves West

The broken securitization system is clogging up the credit market. CVS buys California-based Longs Drug Stores. And China’s manufacturing shifts into high gear as the U.S. idles.


Securitization and the barriers to recovery

A year after the credit crunch hit, the key financial artery of securitization remains jammed, pushing up interest rates even as home, student, and commercial loans get harder to come by, analysts say. Private securitizations, or the packaging of mortgages and other loans to sell as securities, totaled $131 billion in the first half of this year, down from $1 trillion in the same period a year earlier, as investors stopped buying first home mortgages, then commercial mortgages, and now credit card and auto debt. The securitization market needs to be fixed, or replaced, before things get better, says Anthony Lembke at MKP Capital Management. “There is definitely some reinvention that will need to occur.” (The New York Times)

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CVS buys West Coast rival Longs

CVS Caremark, the No. 2 U.S. drugstore chain, agreed to buy competitor Longs Drug Stores for $2.7 billion to expand its reach westward. Longs has 521 stores in California, Hawaii, and the two fastest-growing states, Nevada and Arizona. With Longs, CVS will have about 6,800 stores. “This makes all the sense in the world” for CVS, said Matt Kaufler at Clover Capital Management. “My only question: what took them so long?” (Bloomberg) Separately, Russia’s Novolipetsk Steel said it is buying U.S. steel pipe and tube maker John Maneely Co. for $3.53 billion from private equity firm Carlyle Group. (MarketWatch) Also, Australia’s CSL, the top blood plasma product maker, is buying U.S. rival Talecris Biotherapeutics for $3.1 billion. (Reuters)

ING profit drops 25 percent

ING Groep, the top Dutch financial services firm, reported a 25 percent drop in quarterly profit, to a better-than-expected $2.87 billion. The drop in income was due largely to investment losses at its insurance and wholesale banking units. “If ING is in pain, it’s mainly as an investor and not as an originator of risky assets,” said analyst Ton Gietman Petercam SA. (Bloomberg) Goldman Sachs is the lead buyer for the private equity assets of another Dutch bank, ABN Amro, being sold off by Fortis, Banco Santander, and Royal Bank of Scotland. The Goldman consortium is paying $1.5 billion for the assets, The Wall Street Journal reported. (Reuters)

China’s factories shift to the passing lane

China will overtake the U.S. as the world’s top manufacturer, in nominal dollar terms, as early as next year, consulting firm Global Insight forecasts. That is earlier than expected, due largely to the slowdown in the U.S. economy. In real value-added terms, China shouldn’t overtake the U.S. until 2016 or 2017, but even then the U.S. will be tops in certain high-value manufacturing industries, like aerospace and pharmaceuticals. Manufacturing is becoming less important to the U.S. economy, making up 12.5 percent of GDP versus 36 percent for China. And the U.S. shouldn’t fret, Global Insight said, as “the expanding market in China is more likely to open up greater opportunities for the U.S.” (MarketWatch)

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