Wall Street Breakfast: Must-Know News 13 comments
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- The Mad Hatter and his tea party of losses. The true extent of Madoff's $50B Ponzi scheme grew clearer over the weekend as banks, charities and a slew of individual investors began to reveal their expected losses from the scam's fallout. Among those with heavy exposure are Banco Santander (STD) ($3.1B), HSBC (HBC) (around $1B), Royal Bank of Scotland (RBS) ($601M), Nomura Holdings (NMR) ($302M) and BNP Paribas (BNPQY.PK) (up to $472M). The far-reaching scope of Madoff's scheme raises questions about prior investigations by the SEC and whether the agency should have caught on to the scam years ago. Madoff's accounting firm is now under investigation by a New York State prosecutor, though investors facing losses can justifiably say too little, too late. Yet to be determined is how much money, if any, duped investors will get back, and whether investors who pulled out their funds in recent years will have to return some of their profits.
- Auto bailout stalls again. Automakers breathed a sigh of relief last week when President Bush promised to prevent a 'precipitous collapse' of the industry, but perhaps automakers should have continued to hold their breaths awhile longer. White House officials say an announcement on an auto rescue is not imminent and that there is no timetable for a decision. In the meantime, the White House must make several key decisions about what terms to attach to the bailout and how to raise the necessary funds which could be as much as $10B-$40B or more.
- Tenants find a friend in Fannie. Fannie Mae is finalizing a national policy that will protect tenants from eviction even if their landlords go into foreclosure. The landmark policy, effectively transforming Fannie into a national landlord, goes into effect January 9 and extends indefinitely an earlier decision to suspend tenant evictions during the holiday season. Freddie Mac has not yet announced similar measures, though a spokesperson says they are 'currently evaluating additional actions.'
- Unemployment funds go broke. Mounting joblessness is causing widespread pressure on state unemployment funds, forcing some states to turn to the federal government for loans or to raise corporate taxes to make payments. Funds in Indiana and Michigan have already dried up and both states are borrowing from the federal government. Thirty other states could see the funds that pay unemployment benefits become insolvent over the next few months. States are advised to keep at least one year of peak-level benefits in their trusts, but many have not, and last week jobless benefits rose to 573,000, the highest reading since November 1982.
- Apollo is called off the hunt. Chemicals maker Huntsman (HUN) terminated its $6.5B agreement to be bought by Apollo Management's Hexion Specialty Chemicals. Apollo had tried to back out in June, saying the deal, which was struck just as the credit crisis began in 2007, was funded 100% by debt and would leave the companies insolvent. However, a judge ruled in September that the transaction should move forward. Huntsman's decision to terminate the agreement instead of proceeding with litigation comes down to economic conditions and the weakening chemical sector. As part of the termination agreement, Apollo will pay Huntsman $425M in cash, buy $250M of convertible notes and Hexion will provide a $325M breakup fee.
- Net neutrality at risk. In a move that could put net-neutrality - the concept that all internet traffic is created equal - at risk, Google (GOOG) has approached major phone and cable internet carriers, offering to pay them to fast-track its content. Meanwhile, Microsoft (MSFT) and Yahoo (YHOO) have quietly withdrawn from a coalition that was formed to protect net neutrality, and prominent internet scholars have recently softened their views on the matter. The shift could pose a major challenge to President-elect Obama's outspoken commitment to open and unbiased internet traffic.
- GMAC still pushing for bank status. Still set on becoming a bank-holding company, GMAC (GKM) is racing to raise $2B in fresh capital to qualify for Federal Reserve backstopping of the company's finances. Existing shareholders have already ponied up $750M, but are unlikely to help with the remaining $1.25B. Late Friday, lenders agreed to amended terms of a $38B restructuring of debt obligations, allowing GMAC to focus on talking with potential investors, including private-equity firms.
- Siemens settles. Siemens (SI) is expected to settle a long-standing bribery inquiry with U.S. authorities by paying a record $800M fine and admitting to inadequate internal controls and doctoring its books. The company won't formally plead guilty of bribery charges. Following the settlement, Siemens could face a separate fine of several hundred million dollars from German authorities. The company allegedly spent up to $1B bribing government officials around the world to win infrastructure contracts in recent years. Shares +3.1% in Frankfurt, on relief the settlement wasn't any larger.
- Chinese liquidity. China will boost the amount of money circulating in its economy by 17% next year in a new effort to spur consumer spending and shield the country from a global downturn. As of the end of November, China's money supply had grown at its weakest pace in more than three years.
Today's Markets
- Asia markets closed up. Nikkei +5.2% to 8,665. Hang Seng +2.0% to 15,045. Shanghai +0.5% to 1,964. BSE +1.5% to 9,832.
- In Europe at midday, London +0.8%. Paris +0.6%. Frankfurt +1.7%.
- U.S. futures: Dow -0.1%. S&P -0.2%. Nasdaq +0.25%. Crude +5.0% to $48.60. Gold +0.9% to $828.
Monday's Economic Calendar
- FOMC meeting begins
8:30 Empire State Mfg Survey
9:00 Treasury International Capital
9:15 Industrial Production
1:00 PM NAHB Housing Market Index
Seeking Alpha editor Eli Hoffmann contributed to this post.
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This article has 13 comments:
I don't think there are enough printing presses, and currency quality paper, to cover all the lies we have been getting from our Business leaders & Politicians the past few years??????????
Glen Beck commented last week on his radio show "We won't recognize America this time next year", and I'm understanding maybe what he sees that we don't realize just yet........
SAD............VERY SAD!!!!!!!!!
We all know old people that lived through the great depression that have never put a dime in the market.
States' unemployment funds broke just as job losses start to escalate - great timing. Looks like another bailout target in line will be UC funding.
It's gonna get ugly out there and we ain't seen nothin' yet. Sad. I turn 65 this year. Gonna have to own a lot of gold to have any "golden years".
Celebrate your holidays with people, not stuff. Goodwill and good luck to all.
seems like no one wants to treat money with the respect it deserves and everyone wants to fund some populist charity via tax $$
On Dec 15 09:12 AM tgi nomorebush wrote:
> wonder how many that voted for king george iii bushit would do it
> again? always remember that a few days after 9-11 the king told
> the peasants to buy buy buy........... spend spend spend .......
> borrow borrow borrow .......
What does this have to do with anything financial or stocks, you say? He also said that all the big money celebrities he knows have exited the stock market and will never return due to too many unregulated crooks with gov't foxes guarding the hen house. Also says the market will be a much smaller entity whenever it returns to what will be then known as "normal". Hey, he knows as much as anyone does about this mess and what may happen.
I believe him, as I am gone too. If I lose my money, I want to have some fun while doing so, not misery.
Fact - liars' loans were being made in large numbers through most of 2007.
Fact - the last of them will reset in 2012
Fact - a substantial amount of them are already going bad EVEN AT THE low teaser rates
Fact - unemployment leads to foreclosures.
Fact - job losses are accelerating.
You don't need to be a rocket scientist to predict where the housing market will go, based on the above FACTS
What happened to the attorney generals of the states?
What happened to the FBI?
What happened to the SEC?
And you want to blame Bush? Do you think he should of done their job as well?
We should have people in jail and yet I hear nothing of this!
Could this madness go on longer?
This roller coaster is going to make a few more rounds befor anyone gets let off!!! So hangith thee on.
Cut all of your existing loans in half. Write your new loans accordingly.
1. A 30 year @ 6.68 $330,000 will yield approximately $1,200,000.00
with a payment of $2005.00 per month.
2. A 30 year @ 3.34 $330,000 will yield approximately $600,000.00
with a payment of $1002.50 per month.
3. Now America can work for less!
4. You win and America wins! “We the People for the People”
Stop being so greedy and allow America to grow again.
Think of the snow ball effect
Very few foreclosures
Very few family's out on the street
PROVIDE FEWER LOSSES FOR EVERYONE.
This is something we did not do in the great depression.
Act now or continue to collapse our economy and monetary system.
Zorian 12-12-08