More than 165 companies raised a record $87 billion in U.S. secondary share sales this quarter, and 77 percent of them used the proceeds to slash leverage, according to data compiled by Bloomberg. Ford Motor Co., the only major U.S. automaker that hasn’t filed for bankruptcy, sold $1.6 billion in equity last month to obtain cash and finance a retiree medical fund. Las Vegas-based casino owner MGM Mirage issued $1.1 billion of stock to repay debt, fueling a rally of as much as 14 cents on the dollar in its bonds.
Getting out of debt during a deflationary recession is a smart move. How long this deflation lasts is a larger concern:
The cost of living in the U.S. rose less than forecast in May, culminating in the biggest 12-month drop in prices in almost 60 years.
The consumer price index increased 0.1 percent after no change a month earlier, the Labor Department said today in Washington. In the 12 months ended in May, costs dropped 1.3 percent, the biggest decline since 1950.
Sounds like we don't have to worry about inflation from the Fed's quant easing, right? Wrong. I'm not budging from my stance that the Fed will prove itself unable to take back all of the freshly baked dough they've shoveled into banks.
The companies raising capital are taking advantage of an equity rally that we won't see again for a while.
