Wall Street Breakfast: Must-Know News

• Fannie asks for cash after loss. Fannie Mae (FNM) posted a heavy Q2 loss of $14.8B (see details below), its eighth quarterly loss in a row, prompting the mortgage lender to ask the government for a $10.7B capital injection. Fannie's cumulative losses over the last two years now stand at $101.6B, and the company has drawn $44.9B from the Treasury since April. The company said "we do not expect to operate profitably in the foreseeable future. We expect that we will experience adverse financial effects" during the fight against foreclosures. Shares fell 12.7% in after hours trading. Shares -11.4% premarket (7:00 ET).
• Greenberg settles SEC charges. Hank Greenberg, former CEO and chairman of AIG (AIG), agreed to pay $15M to settle SEC charges accusing him of improper accounting transactions between 2000 and 2005. The SEC also charged former CFO Howard Smith, saying the two men 'were responsible for material misstatements' that created a 'false impression' of AIG's financial results. Smith settled with the SEC for $1.5M. (Read the SEC's statement)
• Broker admits lying in fraud case. Julian Tzolov, a former Credit Suisse (CS) broker, testified before a jury that he and former partner Eric Butler lied to clients and sent them inaccurate information to cover up risky investments. In one of the first criminal trials connected to the credit crunch, Tzolov said he and Butler told clients certain securities were backed by government-guaranteed student loans when this was not the case, and that they did so in part to receive higher commissions. Butler is on trial for fraud, and Tzolov was called as a witness after pleading guilty to securities fraud, wire fraud, conspiracy and bail jumping last month.
• NYT looking to sell Globe. The New York Times (NYT) confirmed for the first time that it has hired Goldman Sachs to help sell its Boston Globe and Worcester Telegram & Gazette newspapers, as well as their websites. In a regulatory filing, the company said the possible sale is part of a strategic restructuring in response to a heavy downturn in advertising and the migration of readers to the internet.
• RBS posts loss on bad loans. Royal Bank of Scotland (RBS) posted a loss of £1.04B in H1, falling far short of the £1.1B profit consensus, after setting aside £7.52B ($12.62B) to cover bad loans. The bank expects impairments to remain at 'elevated levels,' and "there is every sign that our financial performance over the next two years, at a group level, will be poor due to the severe economic downturn in 2008 and 2009 and consequent impact on impairments and funding costs." Shares -14% premarket (7:00 ET).
• FDIC chided for lax supervision. An agency watchdog found the FDIC failed to act in a timely manner to limit the commercial real estate losses that caused the collapse of two banks in Washington and Georgia. The watchdog's report said the FDIC could have exercised 'greater supervisory concern' after finding weaknesses in the banks' loan portfolios. (Read reports I and II (.pdf))
• Twitter falls silent. Twitter and Facebook suffered outages and delays yesterday after denial of service attacks, raising the possibility of 'a single, massively coordinated attack' on social networking sites. Both services have been restored. Google (GOOG) managed to fend off a similar attack yesterday.
• Exchanges back away from flash. The Nasdaq stock exchange and BATS exchange announced separately that they're both voluntarily ending the flash trading they started this year, effective September 1. The moves come amid an SEC investigation into the practice and ahead of a likely ban. Direct Edge, a fast growing rival that has used flash trading since 2006, continues to defend the practice.
• Morgan leaves TARP behind. Morgan Stanley (MS) paid $950M to repurchase the warrant it issued the government, bringing Morgan's total payment to the government, including dividends, to $1.268B. CEO John Mack struck a positive note, saying "we appreciate the critical role that the U.S. government played last fall in helping stabilize the banking industry and financial markets at a moment of unprecedented crisis."
• AmEx sees loan loss improvement. American Express (AXP) said write-offs tied to bad credit-card debt fell sharply for the second straight month, to 9.2% in July from 9.7% in June, and CEO Kenneth Chenault said he's seeing internal credit metrics improve for the first time in 18 months. Despite the positive improvements, analysts warned it's too soon to call a sector recovery, with many attributing the drop in charge-offs to a seasonal trend. In the specific case of American Express, Chenault was very clear that the improvements of the last two months are 'not seasonality.'
• Clunkers gets new funds. As expected, the Senate approved an additional $2B for the 'Cash for Clunkers' program. The measure passed 60-37.
• Jobless claims drop. Initial jobless claims came in at 550K, down 38K from a week ago (revised), and better than the 575K consensus. Continuing claims rose 69K to 6.31M.
• Same-store sales slide. Retailers reported monthly same-store sales yesterday, with most falling short of consensus estimates. July sales were hurt by the continued trend of shoppers cutting back and waiting for discounts, and by a later start to the back-to-school shopping season.

Earnings: Friday Before Open

• AIG (AIG): Q2 EPS of $2.57 vs. consensus of $1.67 (may not be comparable). Revenue of $29.5B (+48%) vs. $26B. Shares +3.6% premarket (7:10 ET). (PR)
• American Oriental Bioengineering (AOB): Q2 EPS of $0.17 misses by $0.01. Revenue of $71M (+21%) vs. $75M. (PR)
• ATP Oil & Gas (ATPG): Q2 EPS of -$0.10 beats by $0.09. Revenue of $81M (-58%) vs. $83M. (PR)
• Cimarex Energy Co (XEC): Q2 EPS of $0.46 vs. $0.41 consensus (may not be comparable). Revenue of $223M (-64%) vs. $219M. (PR)
• Magna International (MGA): Q2 EPS of -$1.29 misses by $0.28. Revenue of $3.7B (-45%) vs. $4.1M. (PR)
• Mirant Corp. (MIR): Q2 EPS of $1.12 vs. consensus of $0.49 (may not be comparable). Revenue of $496M vs. $546M.
• Senior Housing Properties Trust (SNH): Q2 FFO of $0.44 in-line. Revenue of $69M (+32%) vs. $68M. (PR)
• Warner Chilcott (WCRX): Q2 EPS of $0.44 beats by $0.04. Revenue of $251M (+7%) vs. $252M. (PR)

Earnings: Thursday After Close

• Alkermes (ALKS): FQ1 EPS of $0.01 beats by $0.09. Revenue of $47.5M (-41%) vs. $46.4M. (PR)
• Assured Guaranty (AGO): Q2 EPS of $0.46 beats by $0.10. Revenue of $115M (-3%). (PR)
• Beazer (BZH): FQ3 EPS of -$0.72 beats by $0.81. Revenue of $225M (-51%) vs. $226M. (PR)
• CBS (CBS): Q2 EPS of $0.08 beats by $0.01. Revenue of $3B (-11%) in-line. (PR)
• Chiquita (CQB): Q2 EPS of $1.95 beats by $1.13. Revenue of $955M (-4%) vs. $873M. (PR)
• Computer Sciences (CSC): FQ1 EPS of $0.85 beats by $0.34. Revenue of $3.9B (-12%) in-line. Raises full-year EPS guidance to $4.80-5.00 from $4.20-4.30, vs. $4.18. (PR)
• Crocs (CROX): Q2 EPS of -$0.06 beats by $0.15. Revenue of $198M (-11%) vs. $150M. Sees Q3 EPS of -$0.14 to -$0.16 vs. -$0.20. Sees Q3 sales of $150M-160M vs. $141M. (PR)
• DCT Industrial Trust (DCT): Q2 EPS of $0.12 misses by $0.01. Revenue of $60M (-3%) vs. $61M. (PR)
• Emulex (ELX): FQ4 EPS of $0.09 beats by $0.05. Revenue of $79M (-30%) vs. $78M. (PR)
• EOG Resources (EOG): Q2 EPS of $0.73 beats by $0.31. Revenue of $861M (-21%) vs. $966M. PR)
• Fannie Mae (FNM): Q2 EPS of -$2.67. Revenue of $5.6B (+41%). (.pdf)
• Hansen Natural (HANS): Q2 EPS of $0.60 in-line. Revenue of $300M (+6%) vs. $309M. (PR)
• Intrepid Potash (IPI): Q2 EPS of $0.19 misses by $0.04. Revenue of $73M (-30%) vs. $72M. (PR)
• Leap Wireless International (LEAP): Q2 EPS of -$0.89 misses by $0.59. Revenue of $597M (+26%) vs. $636M. Net customer additions of 203,000 (+19%). Churn of 4.4%. Reduces guidance on full-year net customer addition to 1.5M. (PR)
• Maxim Integrated Products (MXIM): FQ4 EPS of $0.11 beats by $0.10. Revenue of $395M (-21%) vs. $368M. Sees Q1 revenue of $415M-445M vs. $388M. (PR)
• Microchip Technology (MCHP): FQ1 EPS of $0.15 beats by $0.02. Revenue of $193M (-28%) vs. $190M. Gross margin in Q1 of 51.4%. Sees Q2 EPS of $0.18-0.20 vs. $0.17. Sees Q3 revenue of $206M-214M vs. $200M. (PR)
• Nvidia (NVDA): Q2 EPS of $0.07 beats by $0.09. Revenue of $777M (-13%) vs. $710M. Sees Q3 revenue up 5-7% over Q2. (PR)
• Pepco Holdings (POM): Q2 EPS of $0.11 misses by $0.13. Revenue of $2.1B (-18%) vs. $2.7B. (PR)
• Public Storage (PSA): Q2 FFO of $1.25 beats by $0.04. Revenue of $347M (-4%) vs. $394M. (PR)
• Rovi Corp. (ROVI): Q2 EPS of $0.38 beats by $0.10. Revenue of $120M (+64%) vs. $110M. (PR)
• Sapient (SAPE): Q2 EPS of $0.10 beats by $0.04. Revenue of $148M (-11%) vs. $144M. (PR)
• SandRidge Energy (SD): Q2 EPS of $0.25 beats by $0.12. EBITDA of $144M (-18%). (PR)
• Sequenom (SQNM): Q2 EPS of -$0.33 misses by $0.06. Revenue of $9M (-28%) vs. $8M. (PR)
• VeriSign (VRSN): Q2 EPS of $0.31 misses by $0.01. Revenue of $257M (+6%) vs. $255M. (PR)
• Westar Energy (WR): Q2 EPS of $0.35 in-line. Revenue of $468M (+4%) vs. $501M. (PR)

Today's Markets

Asian markets closed mostly down. European markets and U.S. futures are trending down too.

• In Asia, Nikkei +0.2% to 10,412. Hang Seng -2.5% to 20,375. Shanghai -2.85% to 3,261. BSE -2.3% to 15,160.
• In Europe at midday, London -1.1%. Paris -0.9%. Frankfurt -0.7%.
• Futures: Dow -0.4%. S&P -0.4%. Nasdaq -0.2%. Crude -0.9% to $71.29. Gold flat.

Friday's Economic Calendar

• 8:30 Non-farm payrolls
  3:00 PM Consumer Credit
• Notable earnings before Friday's open: ABK, AIG, AOB, ATPG, BAM, EIX, MGA, MIR, SNH, WCRX, XEC

Seeking Alpha editor Eli Hoffmann contributed to this post.

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Comments

[doubleguns:]

All the crooks are coming forward and paying puny little fines.

Where is the justice?!!!

I guess class action lawsuits are next where everyone will collect 35 cents.

These folks need to serve jail time. WHAT PRAY TELL will keep this from going on in the future.

Steal 500 million pay back 25 million in fines. This is BS.

50 years sounds more like it to me.

Aug 07 07:59 AM

[absinop:]

08/7/09A. Earnings season is a great opportunity to earn some money. I've taken a position in the following stocks. Their EA announcements are scheduled at the market period indicated. But please remember: Sell the Losers, Keep the Winners.

8/07 before Mrkt opens: HALO PMI XEC
8/07 after Mrkt opens: SBS PPCO NVAX
8/10 before Mrkt opens: VM
8/10 after Mrkt opens: DISH GEOI
8/10 after Mrkt closes: FLR MDR RWC

Aug 07 08:19 AM

[max12345:]

I don't mean to be facetious (or maybe I do) but why exactly is the fact that "Twitter fell silent" "Wall Street Must Know News"? (I looked out my window and strangely enough the World was still there)

I am assuming that something over 99% percent of all people -though maybe on Wall Street the figure is a bit less- who don't use it (and probably never will) couldn't care less and never even noticed?

Let those twittering folks and their twitty followers do their own marketing instead of doing it for them.

Aug 07 08:34 AM

[aNewEraBegins:]

Where is the outrage at what we've become!

Are we all debt slaves?

www.youtube.com/watch?...

Aug 07 08:38 AM

[spald_fr:]

[Greenberg settles SEC charges. Hank Greenberg, former CEO and chairman of AIG (AIG), agreed to pay $15M to settle SEC charges accusing him of improper accounting transactions between 2000 and 2005.]

Well, this is good news. I guess the SEC will now go back to Franklin Raines (who received $90MM in bonuses since 2000) and get some of that bonus money back. Maybe Barney Frank, Chris Dodd and Rahm Emmanuel will lead the charge for justice.

Aug 07 08:42 AM

[doubleguns:]

"Maybe Barney Frank, Chris Dodd and Rahm Emmanuel will lead the charge for justice."

A real posse we could all be proud of!!!!!! hahaha

More like the keystone cops.

Aug 07 09:16 AM

[ebworthen:]

LOL! Yeah, good sarcasm.

Everything is just fine kids, ignore that funnel cloud and the air raid sirens and go out and play.

Unemployment improving...yeah right...just like bank and company profits now that they have taxpayer money and are firing taxpayers to "make" money.

The comeuppance will be shocking.

On Aug 07 08:42 AM spald_fr wrote:

> [Greenberg settles SEC charges. Hank Greenberg, former CEO and chairman
> of AIG (seekingalpha.com/symbo...), agreed to pay $15M to
> settle SEC charges accusing him of improper accounting transactions
> between 2000 and 2005.]
>
> Well, this is good news. I guess the SEC will now go back to Franklin
> Raines (who received $90MM in bonuses since 2000) and get some of
> that bonus money back. Maybe Barney Frank, Chris Dodd and Rahm Emmanuel
> will lead the charge for justice.

Aug 07 09:20 AM

[ebworthen:]

I agree, could care less about the narcisissts addicted to Facebook and Twitter, but notice that Seeking Alpha has the "Publish to Facebook or Twitter" check box for "Add Your Comment".

It's a bandwagon, and people are currently jumping on it, so they are making it relevant for the time being. Remember MySpace? AOL screen names? Betamax?

Yeah...me too.


On Aug 07 08:34 AM max12345 wrote:

> I don't mean to be facetious (or maybe I do) but why exactly is the
> fact that "Twitter fell silent" "Wall Street Must Know News"? (I
> looked out my window and strangely enough the World was still there)
>
>
> I am assuming that something over 99% percent of all people -though
> maybe on Wall Street the figure is a bit less- who don't use it (and
> probably never will) couldn't care less and never even noticed?<br/>
>
> Let those twittering folks and their twitty followers do their own
> marketing instead of doing it for them.

Aug 07 09:25 AM

[Chad Brown:]

Well said. The twits deprived of their tweats should not qualify as "Must Know" news. But the fact that hackers are able to damage the Internet does qualify as news, just as a terrorist attack somewhere along the oil supply chain would. We have become extremely dependent on the Internet being there, as we are dependent on oil supplies Suppose someone cut off our access to Seeking Alpha?


On Aug 07 08:34 AM max12345 wrote:

> I don't mean to be facetious (or maybe I do) but why exactly is the
> fact that "Twitter fell silent" "Wall Street Must Know News"? (I
> looked out my window and strangely enough the World was still there)
>
>
> I am assuming that something over 99% percent of all people -though
> maybe on Wall Street the figure is a bit less- who don't use it (and
> probably never will) couldn't care less and never even noticed?<br/>
>
> Let those twittering folks and their twitty followers do their own
> marketing instead of doing it for them.

Aug 07 10:05 AM

[Buckoux:]

" Where is the outrage at what we've become!"

It's considered disturbing the peace. Any demonstrations of justifiable outrage will only get you a police record and bad credit. However, if you steal and donate part of your theft to charity (read political party) and keep a little ($M) for yourself, why The Queen will ward you an OBE.

Aug 07 10:21 AM

[Duude:]

You're dreaming. Franklin Raines, and every Democrat politician, not to mention every company CEO who has been supportive of the Obama Administration will escape prosecution. Look no further than GE who cooked their books, knowingly dispersed false and misleading info and they only got a $50 million fine from the SEC. They're a $150 billion company while Hank Greenberg was fined $15 million and is no longer a billionaire.


On Aug 07 08:42 AM spald_fr wrote:

> [Greenberg settles SEC charges. Hank Greenberg, former CEO and chairman
> of AIG (seekingalpha.com/symbo...), agreed to pay $15M to
> settle SEC charges accusing him of improper accounting transactions
> between 2000 and 2005.]
>
> Well, this is good news. I guess the SEC will now go back to Franklin
> Raines (who received $90MM in bonuses since 2000) and get some of
> that bonus money back. Maybe Barney Frank, Chris Dodd and Rahm Emmanuel
> will lead the charge for justice.

Aug 07 10:57 AM

[Plasmius:]

You don't seriously believe that any actions we undertake against these crooks will permanently eliminate white-collar crime?

While the current legal backlash against economic gangsters may temporarily satisfy our chagrin, as soon as someone smart & bored enough reaches the right rung in the corporate ladder on Wall Street, the cycle of financial fraud will simply begin again.

The next Bernie Madoff is probably putting his schemes into motion as we speak.


On Aug 07 07:59 AM doubleguns wrote:

> All the crooks are coming forward and paying puny little fines.
>
>
> Where is the justice?!!!
>
> I guess class action lawsuits are next where everyone will collect
> 35 cents.
>
> These folks need to serve jail time. WHAT PRAY TELL will keep this
> from going on in the future.
>
> Steal 500 million pay back 25 million in fines. This is BS.
>
> 50 years sounds more like it to me.

Aug 07 11:07 AM

[AndrewBaker:]

Fannie, AIG, Credit Suisse, Royal Bank of Scotland, Morgan Stanley, American Express and any others I may have forgotten are all doing their bit to tell and show us that they've made mistakes, deserve to be castigated, will toe the line and pay the fine or whatever is required, and really they are great financial businesses just a little misunderstood but getting better at it.

Well, can't say I like the script, but it's part of the deal that most importantly includes the government and Fed agreeing to fund the financials until they're back in good health. I can forget fundamentals for now and rely on the continuance of this support which is having the effect of their stock prices rising regardless.

So, this bear has bought in: whilst I look good in shorts, they've cost me too much. I'm a government man now, and urge everyone to get their fill at prices you won't see again (until the pending crash, so be sure to get out before then).

Aug 07 11:18 AM

[bbowen7:]

The "watchdog" criticism of the FDIC for not saving two banks is a good example of Washington politics. Sheila Bair, the head of the FDIC, was the hero of the housing bubble for raising early alarms when nobody wanted to listen, and for having a sensible approach to foreclosure mitigation. She is also out of step with the administration on new regulatory reform proposals - with the FDIC put to a junior partner position behind Geithner's Treasury. She is a fiscally-responsible Kansas Republican in the land of Barney Frank. There was an excellent article about her in a recent New Yorker Magazine - available in most doctors' offices.

Aug 07 11:29 AM

[Dan / The C...:]

If you steal $100 from a SevenEleven, you get 7 years of jail time. So shouldn't a $1,000,000 fraud be worth 70,000 years in jail? Now that's change I could believe in!

Aug 07 11:56 AM

[Wisdom vs. ...:]

keep sending the same the lawyers to washington and you will never get change; until you progressive, hip, dopes on the coasts quit voting for politicians who are expanding federalism there will never be change. you are the problem. you are making the fed govt and the massive corporations they serve more powerful every election cycle because you do not even understand politics

Aug 07 12:04 PM

[doubleguns:]

I propose that sitting around doing nothing is the worse of the two options. Jail as many of them as we can and take back the loot.

I certainly will not take your route and just roll over and submit to them.

There is no honor in that.


On Aug 07 11:07 AM Plasmius wrote:

> You don't seriously believe that any actions we undertake against
> these crooks will permanently eliminate white-collar crime?
>
> While the current legal backlash against economic gangsters may temporarily
> satisfy our chagrin, as soon as someone smart &amp; bored enough
> reaches the right rung in the corporate ladder on Wall Street, the
> cycle of financial fraud will simply begin again.
>
> The next Bernie Madoff is probably putting his schemes into motion
> as we speak.

Aug 07 12:59 PM

[Plasmius:]

Oh, don't worry, I completely agree that jailing these people is the correct solution. Rolling over and submitting is the worst possible response.

My point is that, though necessary, this response will not suffice in the long term. These crimes will continue despite any attempts we make to pursue lawbreakers and enact policy overhauls.

I agree with your original point though, these guys absolutely deserve jail time.


On Aug 07 12:59 PM doubleguns wrote:

> I propose that sitting around doing nothing is the worse of the two
> options. Jail as many of them as we can and take back the loot.<br/>
>
> I certainly will not take your route and just roll over and submit
> to them.
>
> There is no honor in that.

Aug 07 01:24 PM