Wedding Insurance: When You Just Are Not Sure
Despite some developments in Europe, the market had a pretty good week and looks to close above 11,000 once again. The economic releases were somewhat better than expected and investors ploughed money back into the market sensing that maybe, just maybe, the recessionary fears are overdone. In fact, Marc mentioned to me just last week that he’d like to see the market move higher on bad news. On the surface this sounds upside down, yet it’s just the evidence we’re looking for to help determine if the market has bottomed.
For all intents and purposes, “Greece is bankrupt,” says one of Angela Merkel’s men in parliament. Realization is beginning to dawn that a 21% write-off of Greek debt simply won’t be enough. Talk this week seemed to indicate that creditors will likely have to accept a much steeper 50% loss. Yet this didn’t seem to shake the market too much. Just one day later Dexia, a large European bank, announced they were having liquidity problems. The Wall Street Journal reported that Dexia will essentially be dismantled with France and Belgium initially backing $240 billion in risky and/or bad assets. Yet again, the market didn’t crumble.
In other news, there is talk that American Airlines (AMR) is on the brink of bankruptcy. It is said that the company has burned through its cash reserves and that over 200 pilots have retired in the past two months. While the company stock plunged, the market remained sanguine. Late last week Eastman Kodak (EK) announced they were drawing down their credit line another $160 million which sent speculators running for the exits. One of the oldest and most iconic companies of our generation (and many generations before us) is on the verge of bankruptcy. What would have sent investors out of the market is now seemingly reserved for just the company in question. Both AMR and EK suffered big losses.
Yet stocks rallied. They rallied partly due to a glimmer of optimism that Europe is moving in the right direction, a positive ADP jobs report, September Nonfarm payrolls ahead of expectations and an expansion of the EFSF (see last week). That’s not to say that all is clear. In fact, there are still some large hurdles ahead, i.e. China’s slowing economy and the insurmountable differences between politicians in the United States. However, if this week is an indication, investors appear ready to step back in and test the waters. Earnings announcements start with Alcoa next Tuesday and all eyes will be on earnings and forward guidance. To a large extent, the remainder of the year hinges on the next few weeks.
This week we bring you a story about insurance. You’re no doubt familiar with health, life and home insurance. You may be familiar with casualty and liability insurance. But are you familiar with wedding insurance? Zurich Financial started selling policies in January that cover weddings against cancellation, including no-shows by the bride, groom and their parents due to illness, bad weather and power outage. It even includes a provision for the risk of a caterer being shut down by health inspectors. I suppose if you’re willing to spend upwards of $24,000 on a wedding (the average cost in the U.S. last year), what’s a few hundred more for an insurance policy? Before you ask, this isn’t an advertisement and no we don’t sell this insurance. I thought it was both amusing and informational at the same time depending on which side of the table you’re on.
In closing, I’d be remiss if I didn’t mention the passing of Steve Jobs. As co-founder of Apple, his creativity and innovation sparked a technology revolution that has forever changed our lives. The stock held up this week but we’ll be monitoring it in the weeks ahead to ensure that Apple’s momentum doesn’t falter in Steve’s absence.
October 7, 2011: Market Update
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