Wall Street Breakfast: Must-Know News 21 comments
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- Citigroup tries to avoid U.S. control. With the government's bank stress test results due out later this week, Citigroup (C) may turn to private investors to boost capital by $10B+ and avoid ceding control to the government. Regulators have indicated that discussions are focused on how much of the government's preferred shares must be converted into common stock, a step that could potentially give the government more than a 50% stake in what was once the largest U.S. bank. Citigroup is hoping private money will convince the Treasury not to convert any of its shares, or at least to settle for a partial conversion. Shares +3.4% premarket (7:00 ET).
- Banks make last push before stress test results. Like Citigroup (C), Bank of America (BAC) is working on a plan to raise over $10B in fresh capital. Bank of America executives will reportedly meet with the Treasury and Federal Reserve today to make the case that the findings of the stress tests were too pessimistic. Wells Fargo (WFC) and PNC Financial (PNC) are among the banks that will probably need to raise more money unless they can convince regulators otherwise. Test results are scheduled to be released on Thursday.
- Fiat plans car supergroup. Fresh from a partnership agreement with Chrysler, Italian carmaker Fiat will meet with German government ministers today to discuss a bid for Opel, part of General Motors' (GM) European unit. Fiat may seek to merge its auto group, including 'the Chrysler interest,' with Opel, and then spin off the combined company and list it. The three-way alliance would generate around €80B ($105.8B) in annual revenue and see sales of 6-7M vehicles per year, leapfrogging Fiat's auto group past Ford (F) and Nissan (NSANY), and tying with Volkswagen (VLKAY.PK) for second place behind Toyota (TM).
- Chrysler seeks May assets sale. Working for a quick bankruptcy, Chrysler has asked for court approval to auction most of its assets in three weeks. If Chrysler's plan is approved, creditors will have to file their sale objections by May 11, followed by a May 15 deadline for competing bids and a May 21 hearing to approve the winning bid. Chrysler is also seeking approval to pay Fiat a breakup fee of $35M if it's outbid at auction.
- GM fights bankruptcy pressure. General Motors (GM) and its largest bondholders are still at an impasse over $27B in unsecured claims, leading some analysts to speculate that Chrysler's Chapter 11 was just a dry-run for an increasingly probable GM bankruptcy. GM is expected to accelerate talks with the United Auto Workers union this week and move towards closing around 2,600 dealerships. Shares +5.0% premarket (7:00 ET).
- Boston Globe faces shutdown. The Boston Globe (NYT) said it's ready to file paperwork that would shut down the newspaper within two months if it fails to reach a cost-cutting agreement with its unions. Negotiations broke down early this morning after a midnight deadline passed, and it's unclear when talks will resume. The Boston Globe is the 17th largest U.S. newspaper by circulation, and its closure would leave Boston without a daily, full-service general newspaper of comparable size.
- Berkshire blames Wall St., media, government. Berkshire Hathaway (BRK.A) held its annual meeting on Saturday, and CEO Warren Buffett lambasted bankers, insurers and regulators for 'greed' and 'stupidity,' and blamed the media and regulators for missing the warning signs. He also admitted his own company's shortcomings, telling shareholders "we will continue to do quite well in our insurance and utility operations. We won't do well in other operations." Berkshire shares are down 31% since last year, and a preview of Q1 showed operating profits declined to $1.7B from $1.9B the year before. Full results are expected Friday.
- Sprint, Ericsson in network talks. Sprint Nextel (S) is in final negotiations to outsource its cellular network management to LM Ericsson Telephone (ERIC) and transfer 5,000-7,000 U.S. employees to Ericsson. The move comes as Sprint tries to cut costs in the face of dwindling subscriber numbers. A final deal could take several more weeks and could see Sprint paying as much as $2B over several years.
- Obama's new int'l tax plan. Obama plans to announce a new set of proposals on international tax policy today, with potential implications for U.S. multinational firms. The changes, first referenced in February, would bring in $210B in extra revenue over the next decade.
- Ties questioned between Goldman, NY Fed. New York Federal Reserve Chairman Stephen Friedman has come under fire for his close ties to Goldman Sachs (GS). At the time that Goldman received its expedited approval to become a bank holding company and got a $10B capital injection, Friedman sat on Goldman's board and had a large holding of Goldman stock, which was in violation of Federal Reserve policy once Goldman received its new bank status. Friedman was also overseeing the search for a new president for the New York Fed, a role that ultimately went to a former Goldman executive. Friedman denies any conflicts of interest in these events.
- AIG nears HQ sale. AIG (AIG) is reportedly close to selling its Japanese headquarters for around $1B, and sources say the expected buyer is a Japanese insurance company. The deal would mark one of AIG's largest divestitures in an effort to pay off its government debt.
- Asian nations create liquidity fund. Thirteen Asian countries agreed to set up an emergency $120B liquidity fund to help counter the global financial crisis. Japan, China and South Korea will provide 80% of the currency pool, while Asean members will contribute the remaining 20%.
- More bank failures. Three more banks failed on Friday: American West Bank of Layton, Utah; Citizens Community Bank of Ridgewood, New Jersey; and Silverton Bank of Atlanta, Georgia. This year has seen 32 bank closings so far, compared to 25 in all of 2008 and just three in 2007. Silverton's failure will cost the FDIC around $1.3B, while the combined cost of the other two closures will be around $137.5M.
Earnings: Monday Before Open
- Discovery Communications (DISCA): Q1 EPS of $0.28 beats by $0.04. Revenue of $817M (+1.0%) vs. $799M. (PR)
- Entergy (ETR): Q1 EPS of $1.29 misses by $0.06. Revenue of $2.8B (-2.6%) vs. $3.1B. (PR)
- Henry Schein (HSIC): Q1 EPS of $0.64 beats by $0.06. Revenue of $1.5B (-2.2%) in-line. (PR)
- Portland General Electric Company (POR): Q1 EPS of $0.50 misses by $0.03. Revenue of $485M (+3.0%) vs. $490M. (PR)
- Protective Life (PL): Q1 EPS of $0.86 beats by $0.06. "We expect credit downgrades and impairments to remain at an elevated level, and our stable value account balance should decline." (PR)
- Sohu.com (SOHU): Q1 EPS of $1.20 beats by $0.21. Revenue of $116M (+36.5%) vs. $113M. (PR)
- Sprint Nextel (S): Q1 EPS of -$0.21 misses by $0.16. Revenue of $8.2B (-12.1%) vs. $8.3B. (PR)
Today's Markets
Overseas markets, which were mostly off Friday, came out of the gate trotting.
- Asia: Hang Seng +5.54% to 16,381. Shanghai +3.32% to 2,560. BSE +6.41% to 12,135. Nikkei closed.
- Europe at midday: Paris +0.9% to 3,189. Frankfurt +1.7% to 4,851. Zurich +0.7%. London closed.
- Futures at 7:00: Dow +0.5% to 8225. S&P +0.5% to 880.50. Nasdaq +0.55%. Crude -0.6% to $52.89. Gold +0.5% to $892.30. 30-year Tsy +0.17%. Euro -0.1% vs. dollar. Yen -0.1%. Pound -0.3%.
Monday's Economic Calendar
- 10:00 Construction Spending
10:00 Pending Home Sales
12:30 PM Fed's Hoenig speaks on the financial crisis
2:00 PM Fed's Lacker speaks on the economic outlook - Notable earnings before Monday's open: DISCA, EL, ETR, HSIC, PEG, PL, POR, S, SOHU, SYY, TSN
- Notable earnings after Monday's close: AFG, CHK, CRK, DHI, EOG, EXR, FST, HCN, HLS, HOLX, MCK, MYGN, PFG, PPS, QGEN, SBAC, SM, TXRH, VMC
Seeking Alpha editor Eli Hoffmann contributed to this post.
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This article has 21 comments:
All government revenue should be raised by sales taxes. In this way one pays in proportion to what one spends. Want to pay less tax ? Spend less.
One of the alternative tax plans contained the idea of no sales tax on used goods, another great idea for the poor and those who want to minimize their tax bill. It would also move us away from being such a wasteful society.
But the best part of making taxes voluntary would be to silence the anti-tax lobby. When you only pay according to your voluntary spending, you can "cut" your taxes anytime you want - it's up to you.
Face it, the entire US government and the Fed are wholly owned subsidiaries of big business and special interests. Big Pharma owns and runs the FDA. Big Media owns and runs the FCC. Big Airlines own and run the FAA. Heck, 9/11 could not have happened if the Big Airline lobby hadn't prevented the installation of secure cockpit doors back in the 1980's when hijackings were common.
Of course Goldman is the single most influential vioce in the NY Fed. Water's wet, rocks are hard and Big Bankers run the fed and the government agencies that are supposed to regulate them. The idea that the US government is "of the people by the people and for the people" is about as current as the horse and buggy.
Send them tea bags and all they'll do is make free tea to go with their other freebies. American voters clearly do not get it. They keep voting in a full slate of Republicrats in every election.
It looks like Central Bankers are trying to take over the private sector in the US. After all the Federal Reserve is a Private Corporation. They have absolute control over the economic direction of the US, Europe and the Planet. This is looking uglier and uglier for Capitalism as we know it.
Central Bankers are your Masters!!!
Support HR 1207
This Is The Reason The Founders Put Limits On What The Federal Government Was Allowed To Do. Their Wisdom Has Been Disregarded By Current Measure.
The Moral Of The Story: Power Given To The Seats Intended For Angels Will Eventually Be Usurped By Evil. (This always is the end result because evil is drawn to power over others.)
Decentralized systems police themselves because there is the possibility of "Opting Out" of working with/for evil. When this option is removed, subjugation, No Matter How Benevolent At First, will be corrupted.
Governance Is To Make The "Field Level" And Give All Participants In The System Equal OPPORTUNITY To Succeed By Their Own Endeavor.
When Governance becomes the "Robber Of Producers" and "The Benefactor Of The Consumers" Demise of the system is not far off.
Old Wisdom Will Be Taught By Hardship Once Again.
On May 04 09:29 AM axelrod608 wrote:
> >> "Ties questioned between Goldman, NY Fed." >>
>
> Face it, the entire US government and the Fed are wholly owned subsidiaries
> of big business and special interests. Big Pharma owns and runs
> the FDA. Big Media owns and runs the FCC. Big Airlines own and run
> the FAA. Heck, 9/11 could not have happened if the Big Airline lobby
> hadn't prevented the installation of secure cockpit doors back in
> the 1980's when hijackings were common.
>
> Of course Goldman is the single most influential vioce in the NY
> Fed. Water's wet, rocks are hard and Big Bankers run the fed and
> the government agencies that are supposed to regulate them. The
> idea that the US government is "of the people by the people and for
> the people" is about as current as the horse and buggy.
>
> Send them tea bags and all they'll do is make free tea to go with
> their other freebies. American voters clearly do not get it. They
> keep voting in a full slate of Republicrats in every election.
On May 04 11:21 AM jr007 wrote:
> One of the problems with a sales tax to replace income tax is that
> the poorest folks must spend nearly all of their income just to live...
> whereas other folks with large incomes only spend a small portion
> of theirs on living costs. Coupled with the fact that the sales tax
> would have to be in the 15 to 20% range to replace the funding from
> the other taxes, I would bet. I doubt that the whole idea would work,
> although it is an interesting thought.
It really can be a workable idea. A "poor" person/family would get their taxes back via a *simple* 1 page form reporting income for the year (I guess we could get savings info, etc. to make sure only the actual taxes paid were returned - with a *reasonable* degree of accuracy).
"Rich" folks would get nada back. They naturally consume more and so the tax becomes automatically "progressive". Middle income, ditto.
IRS does not go away, but gets *reduced* big-time. All they do is process one-page returns from individuals, verify reported incomes against W* forms and authorize (or not) refund checks.
The "friction" eliminated by reducing the IRS overhead may result in a much lowered sales tax reate.
Of course, this is unlikely to ever be enacted because congress loses all its leverage over business, industry, etc. because favorable tax treatment would no longer be as easy to implement.
My humble opinion.
HardToLove
Your link, www.foxnews.com/politi.../
He said "Wall Street is not going to play as dominant a role in the economy as regulations reduce some of the massive leveraging and the massive risk-taking that had become so common,"
The products are tied to stock market performance and in some cases guaranteed a certain periodic return, while principal could not be eroded by investment losses.
"I always thought they were crazy when they were doing it," said Buffett, at a press conference in Omaha, his hometown, because of the financial risks to the insurer.
Insurers such as Hartford Financial (HIG.N: Quote, Profile, Research) and Genworth Financial (GNW.N: Quote, Profile, Research) have been badly burned by over-selling these products, which performed badly as the credit crisis sent markets plummeting.
The industry’s retirement products guaranteeing minimum returns on equity-based investments were “crazy,” Buffett said today at a press conference in Omaha, Nebraska. Berkshire gets about half its profit from insurance, mostly from property and casualty coverage.
The industry’s retirement products guaranteeing minimum returns on equity-based investments were “crazy,” Buffett said today at a press conference in Omaha, Nebraska. Berkshire gets about half its profit from insurance, mostly from property and casualty coverage.
When insurers “tell the policyholder that he gets some of the up side and you take all the down side, that’s poison,” Buffett said. “That would be like a stockbroker telling you that he’ll pay you back if your stocks lose money.” "
www.bloomberg.com/apps...
If you were an insurance company and you needed to raise some capital in the past year, what would you have done ?? Heck, Allianz had a brief offering of a fixed annuity with a 10% bonus plus a guaranteed 10% minimum interest per annum. Honestly, what are companies to do when they need to raise capital and the economy is swirling in the bowl ??
Florida's pension fund scooped up a bunch of Lehman preferred with a 10% ( ? from memory) annual return... OOOOPS which is now worth, per share, about the same as a sheet of Scottissue.
ZIRP is forcing anyone who wants a positive return on investment to take risks, BIG risks. It is making the markets a killing field for individual investors. What % of 401K's are up over the past year and a half ? Probably less than 1%.
And even big insurance companies are being forced into bigger and bigger risks to raise capital. God knows the gummint isn't handing out $Trillions to them like they are the big banks.
On May 04 09:29 AM axelrod608 wrote:
> >> "Ties questioned between Goldman, NY Fed." >>
>
> Face it, the entire US government and the Fed are wholly owned subsidiaries
> of big business and special interests. Big Pharma owns and runs the
> FDA. Big Media owns and runs the FCC. Big Airlines own and run the
> FAA. Heck, 9/11 could not have happened if the Big Airline lobby
> hadn't prevented the installation of secure cockpit doors back in
> the 1980's when hijackings were common.
>
> Of course Goldman is the single most influential vioce in the NY
> Fed. Water's wet, rocks are hard and Big Bankers run the fed and
> the government agencies that are supposed to regulate them. The idea
> that the US government is "of the people by the people and for the
> people" is about as current as the horse and buggy.
>
> Send them tea bags and all they'll do is make free tea to go with
> their other freebies. American voters clearly do not get it. They
> keep voting in a full slate of Republicrats in every election.