Economy Watch: Simon Says, Pick Me! Pick Me!

May 4, 2010
By Dees Stribling, Contributing Editor

Various news organizations reported separately on Monday that Simon Property Group Inc. upped its ante for General Growth Properties in its efforts to win GGP and its delectable 200-plus mall portfolio from the clutches of a group of investors led by Brookfield Asset Management Inc. Unnamed sources were cited.

According to these unnamed sources, Simon is willing to pay $18.25 a share for GGP; once upon time, early in the game, Simon offered $9 a share. Simon will also pay off $7 billion worth of GGP debt and assume many more billions in mortgages and other debt.

Simon has very deep pockets, of course. But to make them even deeper, private equity firm Blackstone Group L.P. is reportedly on board to the tune of a cool billion or more. On Wednesday, GGP goes to bankruptcy court to get the Brookfield offer approved as a stalking horse bid, the one that the others must beat. It looks like Simon wants to blow past the stalking horse bid in a big way.

Consumers Raid Their Piggy Banks

On Friday the government reported that consumer spending was up 0.6 percent in March. On Monday the government reported that personal incomes were up only 0.3 percent during the same month. This caused some hand-wringing among economists, to the effect that Americans are edging back to their old (or not-so-old) habits of low, low savings rates.

Savings did indeed decline in March by 8.5 percent compared with the month before. Personal savings rates’ most recent peak was during 2Q09, when American salted away 5.4 percent of disposable income. Everyone was pretty sure at that moment that the country had reached both hell and high water. People aren’t quite so nervous now. During 1Q10, Americans saved 2.7 percent of their incomes.

Back in mid-2009, there was speculation that Americans had been shocked into habits of thrift. The Great Recession was going to make savers of us all, just as the Great Depression did a lot of people who lived through it. But maybe not. Still, more consumer spending at this juncture will at least help the economy recover a more quickly.

Construction Edges Up Due to Stimulus

The U.S Census Bureau reported on Monday that construction spending unexpectedly rose 0.2 percent in March compared with February, the first gain in five months. The increase followed a revised 2.1 percent drop between February and January.

Who’s building? State and local governments, that’s who–with stimulus money from the federal government. The kinds of things being built are power plants, hospitals and transportation systems. The demand for private development projects, by contrast, remains very low indeed. In fact, according to the Census Bureau, the value of private construction projects is now at an 11-year low, with few signs of improving demand to change that picture.

It was another What Me Worry day on Wall Street, with the Dow Jones Industrial Average bouncing upward 143.22 points on Monday, or 1.3 percent, possibly because the Greek crisis looks like it will blow over, or because of various strong quarterly numbers from various large companies (and car sales were up too). The S&P 500 spiked 1.31 percent and the Nasdaq advanced 1.53 percent.