Overheard at American Airlines

"The market immutably sets
The fares and the fuel in our jets,
But a bankruptcy filing
May turn back the dial in
Our benefits, pensions and debts."

AMR Corp has filed for Chapter 11 bankruptcy protection in an effort to bring its cost structure into line with that of the airline industry. The parent of American Airlines is the last of the big "legacy" carriers to restructure its balance sheet and compensation costs in court. Mindful of its proud, 91-year history, American had long avoided a judicial reorganization, but in an environment in which fares are driven by the lowest-cost competitor, the Fort Worth-based carrier's position became untenable.

Facebook IPO - The Inside Story

Mark Zuckerberg, known to be skeptical
Of the IPO stock market spectacle,
Expressed his unease
That I-banking fees
Could ever yield anything practical.

Countered one of the Facebook wise men of it:
"The S.E.C. tells us the 'when' of it;
As our ownership grows,
We'll have to disclose
Our finances, so let's reap the benefit."

The Wall Street Journal reports that Facebook is moving toward a possible $10 billion IPO, which would value the social networking company at $100 billion. CEO & founder Mark Zuckerberg has previously questioned both the value of an IPO and the role of investment banks in such a transaction. However, the SEC may force his hand; come April, the number of Facebook shareholders will have passed 500, the level at which US law requires companies to publish their financial results. At that point, Facebook would have all of the liability of a public company, so the board is evidently warming to the idea of its having the cash proceeds, as well.

Black Friday

When consumers queued up in a quorum,
To do as investors implore 'em,
They bought quite a bit
Of Holiday sh*t,
And forgot all their debts and decorum.

It's all over but the counting: Black Friday 2011 will go down as the all-time greatest, as sales rose 6.6% to a record $11.4 billion. Still, the salient facts suggest that, as the Zero Hedge blog put it, we are literally "shopping like there is no tomorrow." Both the savings rate and consumer credit continue to contract, leading one to question the sustainability of our one-day shopping surge. Curiously, the second-best Black Friday on record was that of 2008, suggesting that this day may not correlate to a vibrant US economy.
Meanwhile, the social networking analysis firm Mashwork analyzed 270,000 Black Friday related tweets to predict that:

• The greatest numbers would shop at Wal-Mart and Best Buy;
• 18% of all purchases would be computers or tablets;
• The iPad would outsell the Kindle Fire by 10-1;
• 46% of shoppers would be purchasing for themselves.

Need we say more?  (Hat tip to Barry Ritholtz.)

Lincoln's Thanksgiving Proclamation

"The Almighty, with merciful gaze
Looking past our iniquitous ways,
Has bountif'ly blessed,
As we all may attest
In a day of Thanksgiving and praise."

In 1863, with the nation ablaze in civil war, President Abraham Lincoln spoke movingly of

"these bounties, which are so constantly enjoyed that we are prone to forget the source from which they come, [to which] others have been added, which are of so extraordinary a nature, that they cannot fail to penetrate and soften even the heart which is habitually insensible to the ever watchful providence of Almighty God... They are the gracious gifts of the Most High God, who, while dealing with us in anger for our sins, hath nevertheless remembered mercy.
It has seemed to me fit and proper that they should be solemnly, reverently and gratefully acknowledged as with one heart and one voice by the whole American People."

It is worthwhile to read the entire proclamation as we come together to give thanks in a time of troubles, and remember the greater trials of our history. Happy Thanksgiving to all!

Overheard Somewhere in Rome

"The euro zone debt crisis, gen'rally,
Is more easily overcome fed'rally,
If those on the Rhine
Would say "Ja" and not "Nein"
To issuance jointly and sev'rally."

As the European debt crisis drags on with no end in sight, some trial balloonists at the European Commission are set to come out with a paper that explores the potential of bonds issued or guaranteed by all of the 17 euro zone members. One immediate obstacle is the resolute opposition of the Germans, who fear liability for the debts of spendthrift neighbors such as Italy. However, combined euro zone debt issuance would carry much more weight in the market than the European Financial Stability Facility (EFSF), which does not appear up to the task of stabilizing the market for Italian treasury bonds.

Not-So-Supercommittee

A supercommittee that tried
To conquer the party divide,
When it ground to a halt,
Found the other one's fault
Was the one thing that each could decide.

With a Monday deadline looming, the Congressional deficit-reduction supercommittee found itself unable to bridge the divide between the Republican and Democratic positions. Having apparently failed in their task of reducing the US federal deficit by $1.2 trillion over 10 years, there was nothing left for committee members to do but succeed at the "blame game." As a consequence, a "sequestration" process will be invoked, under which $1.2 trillion of automatic, across-the-board spending cuts will hit everything from defense to social programs. Is this perhaps the secret wish of the supercommittee members?

A Tale of Harvard & Yale

A fellow was telling a tale:
"Of the days when you'd win or you'd fail
In the gridiron game
When the summit of fame
Was the showdown of Harvard and Yale."

"The roar of the Ivy League crowd,
At the yardage denied or allowed,
Would resound at the goal
In the Field or the Bowl,
As the Crimson or Blue sang aloud."

"But the passage of time slowly went,
And Ivy League football was spent;"
Said this fellow: "At least
If we're not the Big East,
We can still be the top One Percent!"

Overheard in the MF Global Accounting Dept.

"In the annals of shame and ignominy
Of the modern financial economy,
A transgression may start
With a loss on the part
Of a sure-fire thing, not uncommonly."

The New York Times reports that the notorious $600 million of MF Global customers' funds "may no longer be simply missing. It may be gone." Regulators and FBI agents who have worked around the clock to recover the funds now believe that they were used not to margin customers' trades, but to pay off the firm's trading losses. Futures brokers routinely use customers' cash to earn income for themselves, but always back such operations with collateral such as Treasury notes. MF Global now appears to have used up this buffer and simply taken the cash to plug the gaps in its can't-miss $6.3 billion European bond position. This is a shock to the futures trading community, which up to now has believed that its deposits were safely segregated.

Dim Sum Debt

The market for bonds in renminbi
Heretofore has been traded quite thinly,
Though it's possible, thanks
To the world's central banks,
For yuan to be all that it kin be.

The Wall Street Journal reports that bankers pushing for the development of the offshore market for yuan-denominated bonds - so-called "dim sum" bonds - have homed in on a new target group: central banks and sovereign wealth funds. The appeal to many such institutions may be the diversification of their foreign reserves away from US dollars. Though the current outstanding dim sum debt is a paltry CN¥198 billion ($31 billion), larger issues such as this past August's CN¥15 billion ($2.3 billion) notes of the Chinese Finance Ministry have begun to expand the market beyond small investors.