Sitting Out Professional Sports

Sports in US is bigger in more ways than one. For starters, its not just about a single sport (cricket), as in the case of India, but is a buffet of sports with equal feeding frenzy such as Super Bowl, Baseball, Ice Hockey, NBA, NASCAR or Golf.

So even though teams such as the Yankees saying to Bobby Abreu that "We can't pay you as much" or The New York Giants telling Eli Manning that "You're too expensive", is clearly not an option, they still have to somehow manage all this with the sponsorships dwindling and no takers for the Corporate Boxes.

Take Fedex for example. It used to be one of the front runners for advertising spots in the Super Bowl but is sitting it out this year. Similarly, the Dallas Cowboys, New York Jets and New York Giants are still searching for corporations willing to pay to put their names on stadiums the teams are constructing. The hit expected for advertising and Corporate sponsorship is on an average of 2 per slot which earlier used to be at least 10. This means that contrary to common belief, Professional Sports are NOT immune to the economic slowdown. This year the auction prices of Sunday Night Football tickets on ebay will come down and the top teams in the league are expected to lose millions of dollars in sponsorships and the league overall will see companies sitting out the season. In fact, some sports are expected to cut staff by as much as 2000 or more this year.

You thought Professional Sports were immune to financial crisis? Think Again....

Will the Big Auto have to Merge??

As if the congress denying the Big Auto a stimulus package earlier was not bad enough, this might happen again a second time. GM, Chrysler and Ford are looking towards the Congress for a $25 billion stimulus package in order to keep the production and R&D alive. The concern is very real as without technological edge, the US auto manufacturers might be rolling out empty shells after 5 years and most of them might have to close shop post December. In fact, as per Big Auto, the real requirement is as much as $40 billion and even a stimulus package will not be enough.

If nothing else works, then it’s very likely that the 3 companies might have to merge. If that happens, then they may not actually need the Congress anymore for any financial assistance as the combined entity would be more than eligible for a loan from the bank to meet all requirements. I won’t be amazed. There are stranger things in Heaven and Earth than we can imagine.

Better of 2 Evils

A question on every one's mind this Monday must have been that how did Citi manage to bag a $20 billion commitment from the congress when a week earlier the Big Auto were denied $25 billion and asked to chalk out a business plan about how to plan to utilize the money.

The answer is very simple though bitter. Its a matter of picking the better of 2 evils. If the auto industry goes down, then no doubt it will have a significant impact on the employment numbers in US, but if the second largest bank in US does down, then it will take with it much more than just employment. The impact could forestall an even worse shock to the already fragile financial system.

In the words of David Resler, chief economist with Nomura Securities International, "You can't have a financial world without the major banks".

But will there be a Detroit without the Big Auto?

US: Cause and Effect for Mexico

China seems to have cracked a good deal by leasing majority of Mexico for 50 years, in order to overcome the farmland issue and also enabling Chinese companies to build factories in Mexico to supply the North American market more easily. But will that solve problems for Mexico?

Currently it seems like Mexico is on the cliff edge. 80% of Mexico's exports are consumed by US consumers and the slowdown in US means an unlimited supply of problems for Mexico. Because Mexican manufacturers rely heavily on US companies, most of them are laying off workers on a large scale. In places such as Nuevo Lared, employers have laid off as much as 40% of their work force and lost at least 40% of their business in a week. Mexico too like most nations is turning to a stimulus package for rescue. It is looking at a $5.26 billion stimulus package to support the crumbling economy. Many Mexicans used to illegally immigrate to US for better jobs. Jobs in Texas would pay them 40 times the daily wages they would earn back home in Mexico. Now, companies are sending these workers back and denying employment to new workers from across the border.

Will Mexico will be the next in line?

Is GM Next?

Detroit is nothing less than the backbone of the US industrial base and the giant of Detroit, General Motors says that without the government's help in terms of a rescue loan for the industry, it will run out of cash by early next year and might have to file bankruptcy which is turn will start a domino effect that will hit thousands of jobs and hundreds of its suppliers and dealers as well as its Detroit rivals.

The help expected is in terms of a $25 billion rescue loan which several members of the congress are opposing while some others are supporting. One thing is for sure that if GM dies, then so will several other of its rivals and the auto companies in US which are already in a soup will no longer be in a position even to keep the shop floors operational. Recently GM's stock worth based on the predictions for the next 2 quarters and industry outlook for auto manufacturers in US was valued at around $1.
If this does happen, we might have a catalyst which could multiply the current economic crisis several folds.