Wall Street Breakfast: Must-Know News

• Salary bumps at Citigroup. Citigroup (C) plans to raise base salaries by as much as 50% to compensate for a sharp reduction in annual bonuses. Investment bankers and traders will see the biggest increases, while workers in consumer banking, credit cards, legal and risk management will see smaller salary adjustments. Citigroup is following similar moves by Morgan Stanley (MS) and UBS (UBS). Separately, Citigroup temporarily suspended loan applications at one of its mortgage units after a quality-control review found some property appraisals and income-verification documents were missing, and will use the next few weeks to change its procedures.
• China faces WTO complaint. The U.S. and EU filed a WTO complaint against China over export restraints on raw materials. China plans to contest the complaint, saying its export policy aims to protect the environment and natural resources and 'is in accordance with WTO rules.' This is the third joint complaint brought by the U.S. and EU against China, and the first brought by the Obama administration.
• Bank 'tricks' necessitate new agency. A government watchdog will urge lawmakers to create a new government agency aimed at protecting consumers from the 'tricks and traps' set by banks. In prepared remarks, Elizabeth Warren, chairwoman of the oversight panel, said "We can help fix the broken credit market. And I can sum it up in four words: Consumer Financial Protection Agency." Bank industry groups, unsurprisingly, oppose the move, saying it will be costly and won't better protect consumers.
• Bad news Boeing. Just one week after a top executive said the 787 Dreamliner was ready to fly, Boeing (BA) postponed the plane's first flight after tests indicated the need for reinforcement to the jet's body, sending shares down 6.5%. The Dreamliner is already two years behind schedule, and it will be several weeks before a new delivery timetable is available. Along with its 787 delay, satellite-launch service provider Sea Launch (40% owned by Boeing) filed for bankruptcy, Congress urged the Pentagon to review substandard Iraq results from the V-22 Osprey (developed and built by Boeing and Textron (TXT)) and some airlines are either deferring delivery of Boeing planes or turning to rival Airbus in the interim.
• Madoff investor seeks SEC damages. The SEC rejected a Madoff investor's claim that the agency pay her $1.7M to cover her losses from the fraud. The legal action is believed to be the first by an investor trying to hold the SEC responsible for the fraud, and the SEC's rejection of her claims sets the stage for a federal lawsuit.
• Banks reach Huntsman settlement. Credit Suisse (CS) and Deutsche Bank (DB) settled their lawsuit over the busted buyout of Huntsman (HUN). The two banks will pay Huntsman $632M and extend a $1.1B loan on favorable terms. The settlement is an economic win for Credit Suisse and Deutsche Bank: the banks face lower costs in the settlement than the losses that would have accompanied the $15.4B of debt originally committed to the deal, and don't have to worry about a costly and unpredictable legal verdict.
• Oracle beats despite tech slowdown. Oracle (ORCL) posted better than expected quarterly earnings (see details below), but also reported a revenue decline for the first time since 2002. Oracle, which does over half its business overseas, was hurt in part by a strong dollar; in constant currency, its revenue climbed 4% and income was up 5%. Oracle's numbers were also hurt by the many companies holding off from making large technology purchases during the recession.
• Sinopec buys Addax. Sinopec (SNP) agreed to buy Swiss explorer Addax Petroleum (ADXTF.PK) for $7.3B in cash, gaining access to oil reserves in Iraq's Kurdish region and Africa. The deal marks a 47% premium on Addax's closing price in Toronto on June 5, the day before takeover talks were announced.
• OECD ups outlook. The OECD raised its outlook for its 30 member nations for the first time in two years on signs the U.S. recession is easing. The combined economy of OECD nations will shrink 4.1% this year and grow 0.7% in 2010, vs. earlier projections of a 4.3% contraction in 2009 and a 0.1% contraction in 2010. The organization expects the U.S. economy to shrink 2.8% this year and grow 0.9% next year.
• Retail sales fall. Chain store sales fell 4.4% in the first three weeks of June vs. last month, Redbook reported, worse than the -4.1% expected. According to ICSC, weekly sales were flat vs. last week, as the recession and bad weather continued to hurt June sales.
• Home sales rise. May Existing Home Sales rose 2.4% to 4.77M per year, just short of the 4.82M consensus. Prices fell 0.1% in April, vs. consensus of -0.4% and a 1.4% drop in March.
• MBA apps rise. Mortgage applications rose 6.6% last week, MBA reported. The average interest rate on 30-year fixed-rate mortgages fell to 5.44% from 5.5%.
• Richmond Fed inches up. The Richmond Fed Manufacturing Index came in at 6 vs. May's 4. Activity in Central Atlantic advanced 'somewhat faster' on expanded new orders, factory shipments that grew at slightly slower rate and moderate weakness in unemployment. Manufacturers softened their outlook for the next six months, expecting slowdown in shipments, new orders and utilization.
• Consumer confidence weakens. ABC's Consumer Confidence Index fell to -53, down 4 this week and just a point off its all-time low from Jan. 25. The long-term average is -12. Only 39% of Americans rate their own finances positively, the lowest in 23 years of weekly polls.

Earnings: Wednesday Before Open

• Monsanto (MON): FQ3 EPS of $1.25 beats by $0.08. Revenue of $3.2B (-10.7%) vs. $3.4B. (PR)
• Rite Aid (RAD): Q1 EPS of -$0.11 beats by $0.02. Revenue of $6.5B (-1.2%) in-line. (PR)

Earnings: Tuesday After Close

• Darden Restaurants (DRI): FQ4 EPS of $0.90 beats by $0.04. Revenue of $1.98B (+8%) in-line. The company declared a quarterly dividend of 0.25, a 25 percent increase. Sees FY10 EPS of $2.59-$2.85 vs. $2.71. (PR)
• Jabil Circuit (JBL): FQ3 EPS of $0.04 beats by $0.01. Revenue of $2.62B in-line. Sees FQ4 EPS of $0.02-0.12 vs. $0.09 and revenue of $2.5-2.7B vs. $2.7B. Remains cautious on overall economy and possible impact on its performance. (PR)
• Oracle (ORCL): FQ4 EPS of $0.46 beats by $0.02. Revenue of $6.9B vs. $6.47B. Operating margin +2.4 points to 51%. Says it took market share from rival SAP AG (SAP) in every region. (PR)

Today's Markets

Asian markets closed up. European markets and U.S. futures start the day in positive territory as well.

• In Asia, Nikkei +0.4% to 9,590. Hang Seng +2% to 17,892. Shanghai +1% to 2,922. BSE +0.7% to 14,423.
• In Europe at midday, London +0.2%. Paris +0.7%. Frankfurt +0.9%.
• U.S. futures: Dow +0.4%. S&P +0.4%. Nasdaq +0.3%. Crude -0.7% to $68.75. Gold +0.6% to $929.70.

Wednesday's Economic Calendar

• 7:00 MBA Mortgage Applications
  8:30 Durable Goods Orders
  10:00 New Home Sales
  10:30 EIA Petroleum Status
  2:15 PM FOMC Announcement
• Notable earnings before Wednesday's open: MON, RAD
• Notable earnings after Wednesday's close: BBBY, NKE, PAYX, RHT

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[doubleguns:]

Isn't it so obvious China is protecting their job environment not natures environment.

The protectionism during the great depression was a major contributor to the severity. Seems we are headed down the same familiar path. Attitude will soon be retaliatory making sure if one goes we all go.

We know better. Question is will we stop it?

Jun 24 08:12 AM

[BlueOkie:]

Anyone else think there is some behind the scenes money being transferred at the banks of C, MS, and UBS? Billions and Billions of dollars are floating around and some surely is floating into some politician's pockets. The worse is it is our TAX DOLLARS.

Jun 24 08:15 AM

[robert.b.fe...:]

Amazing. Real estate being touted as improving ( read that deteriorating slower) while Red Roof Inn defaults on it's creditors to the tune of millions of dollars. I'm sure it won't be the last either. Look out I think I see another shoe dropping.

Jun 24 08:38 AM

[User 357705:]

And your children's tax dollars and your grand children's tax dollars!


On Jun 24 08:15 AM BlueOkie wrote:

> The worse is it is our TAX DOLLARS.

Jun 24 08:39 AM

[User 357705:]

Indeed? And what is USA doing? Better yet, aren't you acting in your own best interest? Right, why would China act otherwise? A China that continues to bailout USA?


On Jun 24 08:12 AM doubleguns wrote:

> Isn't it so obvious China is protecting their job environment not
> natures environment.
>

Jun 24 08:43 AM

[pockyclips ...:]

I wish I could get a 50% bonus for fraud and corruption! You don't have to worry about your grandchild's tax dollars; Uncle Sam's debts will be null and void when we become the N.A.U. and move to the Amero.

Jun 24 08:56 AM

[rpboxster:]

50% raise on your base pay, not bonus. In other words, now you have no incentive whatsoever to do good for shareholders or yourself--you're going to collect a fat paycheck no matter what.


On Jun 24 08:56 AM pockyclips 2020 wrote:

> I wish I could get a 50% bonus for fraud and corruption! You don't
> have to worry about your grandchild's tax dollars; Uncle Sam's debts
> will be null and void when we become the N.A.U. and move to the Amero.

Jun 24 09:18 AM

[User 357705:]

What union is representing these guys?


On Jun 24 09:18 AM rpboxster wrote:

> 50% raise on your base pay, not bonus. In other words, now you have
> no incentive whatsoever to do good for shareholders or yourself--you're
> going to collect a fat paycheck no matter what.

Jun 24 09:25 AM

[robert.b.fe...:]

We are refusing to use our cheap fossile fuel and relying on the creation of "Green Jobs." while trying to pass the cap and trade tax this Friday. Yup we are looking out for number one all right.


On Jun 24 08:43 AM User 357705 wrote:

> Indeed? And what is USA doing? Better yet, aren't you acting in your
> own best interest? Right, why would China act otherwise? A China
> that continues to bailout USA?

Jun 24 09:54 AM

[User 357705:]

USA not acting in its own self interest?

What about the WTO trade charges that: Jagdish Bhagwati, professor at Columbia University and senior fellow at the Council on Foreign Relations, said: “I don’t think we’ll win a case under existing jurisprudence. I think this is a shot across the bows.”

America can't compete so it files charges it knows it can't possibly prevail with?

Again, America making friends and influencing people in the shadiest way while China is making deals, friends, and taking names.


On Jun 24 09:54 AM robert.b.ferguson wrote:

> We are refusing to use our cheap fossile fuel and relying on the
> creation of "Green Jobs." while trying to pass the cap and trade
> tax this Friday. Yup we are looking out for number one all right.
>

Jun 24 10:03 AM

[ksmithdc:]

Interesting read, thanks.

Jun 24 10:05 AM

[Warm_Paw:]

Bank earnings aren't being reported as they used to be.
Earnings are over positive to hype the economy.
Notice this crisis centers around toxic assets on bank balance sheets yet no one discusses the percentage of toxic assets unwound for each bank, or the amount of these assets left on bank balance sheets.
We have at least two more death spirals dealing with the unwinding of these assets. The public's obviously not to know that.
The public's to take the hit buying bank stocks so they can dump these mortgage backed securities.
The very idea citi or Goldman want to give larger pay to bank execs has me wonder why the tax payer should be on the hook to bail them out.
Let them fail. Greedy pigs should get slaughtered. As for throwing the economy into a tail spin, it's inevitable.
These banks need to go the way of the car companies.
The real challenge is bringing manufacturing back to America.
Jobless people don't pay taxes.
The few working people won't be able to shoulder the burden.
Of course we could raise the tax rates on bankers and right the countries woes.

Jun 24 10:09 AM

[bobbobwhite:]

Citi is doing all it can to circumvent the intent of gov't regulations on employee compensation, and is wide open about it whichs shows a demented pride in being able to defy the gov't and the public after receiving so much TARP money earlier. That displays a level of arrogance and uncaring that surpises even me, and I'm a cynic.

Jun 24 10:09 AM

[robert.b.fe...:]

America can compete with any one on a level playing field. When will China implement EPA standards, OSHA standards, CAFE standards? Are they going to implement cap and trade if we do? Will the state discontinue control of the unions in China? Cuba is helping China drill for oil off of the North American coast and the U.S. refuses to. Care to reconsider?


On Jun 24 10:03 AM User 357705 wrote:

> USA not acting in its own self interest?
>
> What about the WTO trade charges that: Jagdish Bhagwati, professor
> at Columbia University and senior fellow at the Council on Foreign
> Relations, said: “I don’t think we’ll win a case under existing jurisprudence.
> I think this is a shot across the bows.”
>
> America can't compete so it files charges it knows it can't possibly
> prevail with?
>
> Again, America making friends and influencing people in the shadiest
> way while China is making deals, friends, and taking names.

Jun 24 10:35 AM

[robert.b.fe...:]

Speaking of making friends and influencing people how are all of the dead pets and children working out for you?

Jun 24 10:42 AM

[bbowen7:]

We are certainly committed to losing the economic competition with China. They continue to buy up sources of materials in the Middle East and Africa, and to hold on to what they have domestically. We are ready to shoot ourselves in the foot with regulations designed to put the coal industry out of business - and with it 50% of our electric generation. And those who say "environment trumps economics", refuse to work toward a nuclear energy replacement. Such is the decline of civilizations.

Jun 24 11:55 AM

[AndrewBaker:]

So the banks are upping salaries 'cos bonuses can't be paid. I'd love a job where I get a 50% pay hike for losing my company money through bad loans and defective products. Are these people in the real world?

Jun 24 12:09 PM

[Econ 101:]

These are good ideas but the shills on K Street wont let it happen. They are in control of our government. Our money is being stolen as we sit here and complain. Support HR 1207, an Audit of the Federal Reserve!

The best explination of what is happening:
www.youtube.com/watch?...


On Jun 24 10:09 AM Warm_Paw wrote:

> Bank earnings aren't being reported as they used to be.
> Earnings are over positive to hype the economy.
> Notice this crisis centers around toxic assets on bank balance sheets
> yet no one discusses the percentage of toxic assets unwound for each
> bank, or the amount of these assets left on bank balance sheets.
>
> We have at least two more death spirals dealing with the unwinding
> of these assets. The public's obviously not to know that.
> The public's to take the hit buying bank stocks so they can dump
> these mortgage backed securities.
> The very idea citi or Goldman want to give larger pay to bank execs
> has me wonder why the tax payer should be on the hook to bail them
> out.
> Let them fail. Greedy pigs should get slaughtered. As for throwing
> the economy into a tail spin, it's inevitable.
> These banks need to go the way of the car companies.
> The real challenge is bringing manufacturing back to America.
> Jobless people don't pay taxes.
> The few working people won't be able to shoulder the burden.
> Of course we could raise the tax rates on bankers and right the countries
> woes.

Jun 24 12:31 PM

[Shaggieman:]

Not before taking out a $245M loan from you guessed it, Citi.

Tuesday, June 23, 2009
More Bad News For Boeing: Sea Launch Files For Bankruptcy

Posted by Tyler Durden at 11:20 AM
Commercial satellite-launch services provider Sea Launch, which is 40% owned by 787 on time manufacturer extraordinaire, Boeing, filed for bankruptcy last night in Delaware (09-12513). The Long Beach company which has used the Kazakhstan Baikonur Space Center for rocket launches in the past, has listed liabilities of over $1 billion.

What is hilarious is that just last week, the Company launched a $245 million one-year Term Loan underwritten by Citigroup. Is Citi doomed to have the worst luck of any investment bank for ever and ever? For what it's worth, Goldman only provides loans to soon to be bankrupt companies (ahem, Movie Gallery) if they file for chapter with at least a one month lag post refi (and long after the bank has syndicated the loan to unwitting, dimwitted credit PMs who have to generate 15% returns in 3 months or the Exit sign it is).

At least gullible investors in the recent TL issue (yielding between L+200-350) be happy that it is guaranteed by Boeing, which after its 5th 787 launch delay may be better off changing its business model to focus on making space ship launch pads.

Jun 24 12:31 PM

[dcb:]

Hey the people who pulled together that loan made a nice fat fee. Once mare proving that the system is really a ponzi scheme where the shreholder is the last on the list


On Jun 24 12:31 PM Shaggieman wrote:

> Not before taking out a $245M loan from you guessed it, Citi.
>
> Tuesday, June 23, 2009
> More Bad News For Boeing: Sea Launch Files For Bankruptcy
>
> Posted by Tyler Durden at 11:20 AM
> Commercial satellite-launch services provider Sea Launch, which is
> 40% owned by 787 on time manufacturer extraordinaire, Boeing, filed
> for bankruptcy last night in Delaware (09-12513). The Long Beach
> company which has used the Kazakhstan Baikonur Space Center for rocket
> launches in the past, has listed liabilities of over $1 billion.
>
>
> What is hilarious is that just last week, the Company launched a
> $245 million one-year Term Loan underwritten by Citigroup. Is Citi
> doomed to have the worst luck of any investment bank for ever and
> ever? For what it's worth, Goldman only provides loans to soon to
> be bankrupt companies (ahem, Movie Gallery) if they file for chapter
> with at least a one month lag post refi (and long after the bank
> has syndicated the loan to unwitting, dimwitted credit PMs who have
> to generate 15% returns in 3 months or the Exit sign it is).
>
> At least gullible investors in the recent TL issue (yielding between
> L+200-350) be happy that it is guaranteed by Boeing, which after
> its 5th 787 launch delay may be better off changing its business
> model to focus on making space ship launch pads.

Jun 24 01:29 PM

[dcb:]

Does anyone besides myself notice that he consumer confidence number does not reach the tradational media, but durable goods gets huge press. Once more the scam continues. market up, american's down.

Jun 24 01:31 PM

[dcb:]

anyone love the markets today. the desks pumping it up all morning to slowly sell what they bought off in the afternoon. makes you think there is actually demand from the public. maybe they should have at least a three day holding period so there wouldn't be so much manipulation

Jun 24 01:38 PM

[a. palmer jr.:]

Just when you thought the bankers couldn't stoop much lower they prove you wrong. I guess the best bet is to stop dealing with any bank that does underhanded tricks like this.

Jun 24 02:40 PM

[robert.b.fe...:]

This could be really amusing when the machines start shorting each other.

Jun 24 06:09 PM

[Joseph Sherman:]

Salary bumps at Citigroup - why not tie pay to performance?

Jun 24 11:32 PM

[Jake Kimble:]

Despite the pessimistic news on Boeing as of late, my colleague made a strong case for the company. I believe that it presents an opportunity for long-term investors to buy a "strong company on weakness." Think of it this way: buy the stock on a little dip to $40, watch it climb back to $50 and cash in. Say this takes an absurd amount of time... say exactly 2 years. That's a 25% capital gain, and 4% per year in dividends. A 33% gain over two years? I'll take that investment anyday.

Check out my colleague's article (Jim Regan) at our company website: www.bullishbankers.com.../

Jun 26 01:46 PM