Wall Street Breakfast: Must-Know News

• Getting tough on TARP. The Obama administration is expected to unveil new, stricter rules for banks receiving TARP aid, including restrictions on executive pay and increased lending requirements. Sources say the new rules could be announced some time this week, with Obama's new bank rescue plan following the week after. To improve public perception of the bailout, officials are also considering splitting TARP off from the Treasury and creating an independent entity.
• Rio Tinto tempts Chinalco. Rio Tinto (RTP) is in talks to sell some of its assets to its biggest shareholder, Chinese government-owned Chinalco (ACH), in an effort to cut debt by as much as $8B. Rio is considering a combination of asset sales, convertible notes and share issues that would raise $15B in total and lift Chinalco's Rio stake to over 11% from 9%. The details of which assets are under discussion have not been revealed, but "for $8B, it's going to be something serious." Rio has close to $39B in debt, and last week sold a Potash project to Vale (RIO) for $1.6B. RTP +5.3% premarket (7:00 ET).
• GM lobbies against heavy tax bill. After being promised $13.4B in emergency federal aid, General Motors (GM) may face a $7B tax bill as a result of the new restructuring plan it hopes to finalize by mid-February, which will likely include issuing outstanding stock to debtholders, the United Auto Workers union and the government. Sources say GM is trying to persuade lawmakers to amend the $819B stimulus package so the tax bill can be avoided, warning that a tax liability of that size could endanger GM's efforts to steer clear of bankruptcy.
• Chrysler fights to stop sales slip. Chrysler is facing its own problems as it runs into unexpected resistance from former financing arm Chrysler Financial. Once a 'captive' lender, Chrysler Financial was split into a separate company in 2007 and, hurting from the financial meltdown, has been increasingly focused on its own bottom line. Chrysler Financial stopped offering auto leases last summer and cut back on auto loans, making it harder for Chrysler to lure customers as U.S. auto sales plunged. With a 53% drop in December sales, Chrysler is once again expected to be amongst the hardest hit when January's auto sales are released this week. A Chrysler spokesman acknowledged sales have suffered from "the reduction in competitive financing and leasing services available from Chrysler Financial as a result of the global credit crunch."
• Shifting fortunes for RBS, ABN. Nationalized Dutch bank ABN Amro is in exploratory talks to buy back some of its former businesses from Royal Bank of Scotland (RBS). Dutch finance minister Wouter Bos confirmed there had been contact between ABN and RBS, but said the goal is not to re-create the same ABN that existed before being bought and broken up in 2007, but rather a 'new bank' that can be a 'major player.' The talks highlight a major reversal of fortunes for ABN and RBS; RBS is expected to report losses of £28B ($40B) later this month and is conducting a strategic review to see which operations it can sell.
• Amylin faces calls for better management. Hedge fund Eastbourne Capital has nominated five directors for the board of Amylin Pharmaceuticals (AMLN) and is putting forward a slate by investor Carl Icahn. Eastbourne owns 12.5% of Amylin and said in a letter to management yesterday that the board needs to be 'significantly strengthened' and that Eastbourne has "lost confidence in Amylin’s leadership to take this rich product portfolio and execute an operational strategy that is in the best interest of the shareholders." Amylin shares have lost 64% in the last 12 months.
• Panasonic's looming loss. Panasonic (PC) is set to post a ¥350B ($3.9B) annual net loss, sources say, its first net loss in six years. The electronics maker has been battling falling demand and rising costs, as well a strong yen cutting into overseas earnings. The company had previously forecast a net profit of ¥30B in November, a downward revision from a ¥310B projected profit.
• Santander's Madoff payout faces court obstacle. Investors in Banco Santander's (STD) Optimal Equity Fund have asked a U.S. court to halt Santander's plans to compensate Madoff-hit investors with new shares. Before allowing the compensation plan to proceed, investors involved in the court movement want to determine whether Santander shared some responsibility for the alleged fraud. According to the suit, Santander's plan was 'coercive,' 'deceitful' and 'onerous.'

Earnings: Monday Before Open

• BE Aerospace (BEAV): Q4 EPS of $0.53 beats by $0.07. Revenue of $526.8M (+13.7%) vs. $595.1M. (PR)
• Corn Products International (CPO): Q4 EPS of $0.70 beats by $0.07. Revenue of $957.1M (+0.2%) vs. $964.8M. (PR)
• Humana (HUM): Q4 EPS of $1.03 misses by $0.04. Revenue of $7.5B (+18.1%) vs. $7.4B. (PR)
• Mattel (MAT): Q4 EPS of $0.49 misses by $0.23. Revenue of $1.9B (-11.4%) vs. $2.2B. (PR)

Today's Markets

• Asia markets closed broadly down. Nikkei -1.5% to 7,874. Hang Seng -3.1% to 12,861. Shanghai +1.1% to 2,012. BSE -3.8% to 9,067.
• In Europe at midday, London -1.5%. Paris -2.3%. Frankfurt -2.0%.
• U.S. futures: Dow -1.2%. S&P -1.2%. Nasdaq -1.8%. Crude -2.6% to $40.59. Gold -1.4% to $914.50.

Monday's Economic Calendar

• Motor Vehicle Sales
  8:30 Personal Income and Outlays
  10:00 ISM Manufacturing Index
  10:00 Construction Spending
• Notable earnings before Monday's open: BEAV, CPO, EPD, HUM, MAT, ROK, SYY
• Notable earnings after Monday's close: AFL, APC, ATHR, CCK, HOLX, PCL, RCII, SNDK

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[charles hopfl:]

Everyone wants a tax change for 2009. It would only be fair and prudent to allow (at least) individual stockholders to take their losses on security sales as ordinary losses instead of capital losses. This would only apply for 2009 and would allow these individuals to lessen their tax burden on other income including wages for 2009 and clear the air for the future. The argument that the government could not afford to take such a lessening of income in 2009 falls flat when looked at against the trillions the government is giving out in bail out money and war effort (all of which does not help the majority of taxpayers in the country one bit). The majority need some help desparately.

Feb 02 12:12 PM

[bbowen7:]

There seems to be a fork in the road here. Does the government save the US banking system, or does it try to save the global financial system. If the TARP is used to buy back toxic assets, doesn't that mean from US banks, foreign banks, hedge funds, and who knows what else? These things are fungible, they float around, and they are broadly owned and interconnected. But even our printing presses will run out of ink if we try to solve everything with no more pain for anyone. Paulson made a good switch - perhaps lousy public policy for the process, but good economics. Now it looks as if the Obama gang wants to go down the road that Paulson avoided. Ugh.

Feb 02 01:08 PM

[xmichaelx:]

On Feb 02 12:12 PM charles hopfl wrote:

> Everyone wants a tax change for 2009. It would only be fair and
> prudent to allow (at least) individual stockholders to take their
> losses on security sales as ordinary losses instead of capital losses.

Why should investors (including myself) get a break? We gambled, we lost. Time to pay the piper. This is what being an adult is all about.

> The majority need some help desperately.

Yes, but the majority are not investors, except in retirement vehicles with no tax losses to worry about.

Feb 02 01:55 PM

[Big-P:]

Big-P is back from New Zealand and he's astonished at the blatant fraud being perpetrated by the politicians of OUR country. I don't care if you're a Democrat or a Republican...all of US need to stop these clowns before they destroy OUR country. The "Tool Shed" is growing and, as soon as I launch it, you're going to realize the sickening scale of bogusity. (my word)

Big-P

Feb 03 07:46 AM