Wall Street Breakfast: Must-Know News

• Gov't shelves overseas tax grab. Obama aides say the administration has set aside a plan to raise more than $200B in new taxes from multinational companies by changing the way overseas profits are taxed. The idea went "from red-hot to white-cold" after a blitz campaign in which corporations claimed the changes would punish companies with offshore operations, and posed "potentially devastating" challenges to manufacturers which rely heavily on foreign sales. The abrupt about-face may suggest a change in the White House's hard line against big business.
• BofA to show its hand. Sources say Bank of America (BAC) has reversed course, deciding to waive attorney-client privilege and hand over "troves of documents" regarding legal advice it received during its acquisition of Merrill Lynch. Executives, including exiting CEO Ken Lewis, have continually claimed they followed lawyers' advice in deciding what to disclose to shareholders. BofA hopes the shift will pave a path to settlements, and ease pressure on the bank as it tries to sort out its internal turmoil.
• CIT swoons. Sources say CIT Group (CIT) is seeing little interest from bondholders for its debt exchange offer aimed at repairing its fragile balance sheet, making bankruptcy increasingly likely. If necessary, CIT is thought to favor a prepackaged bankruptcy, but sources say it may not find enough debtholder approval for that either, forcing it into a "prenegotiated bankruptcy," which typically has less creditor support.
• Regulators eye naked access trading. Regulators are honing in on a version of high-frequency trading known as naked access, which allows large trading desks and hedge funds to trade directly on exchanges using their broker's "market participant ID," and leaves regulators in the dark as to the identity of the counterparty. Exchanges and brokerages have supported the practice, which brings in huge trading volumes and fees. While "flash orders" raised concerns over fairness, here regulators are worried that a cascade of erroneous rapid-fire orders could destabilize markets, because the practice circumvents the normal set of checks-and-balances.
• AIG sells Nan Shan for $2.15B. AIG (AIG) confirmed it has agreed to sell its Taiwan life insurance unit, Nan Shan, to a consortium led by Hong Kong-based investment company Primus Financial Holdings for $2.15B, its largest asset sale so far. AIG is also preparing two life-insurance businesses - AIA and Alico - for listings in Asia and New York respectively.
• GM could seal Opel deal this week. GM CEO Fritz Henderson says it's "quite possible" the company will finalize the €5B sale of its European arm Opel to a Magna-led (MGA) consortium this week. Under the agreement, GM will retain a 35% stake in the Frankfurt-based carmaker. Henderson also said GM plans to conduct an IPO in the second half of 2010.
• Whitney revokes only Buy recommendation. Bank analyst Meredith Whitney this morning dropped Goldman Sachs (GS), until now her only Buy stock, to Neutral. Whitney upgraded Goldman to Buy on July 13, since when shares have risen 34%. As recently as Sept. 10, she said Goldman "still has a lot of gas in its tank." Shares -1.1% premarket.
• RailAmerica IPO misses mark. RailAmerica's (RA) IPO of 11.5M shares priced at $15, shy of the target range of $16-18, parent Fortress Investment Group (FIG) said late Monday. Fortress still owns 55.8% of RailAmerica. Shares return to the NYSE this morning, following a two-year absence after being taken private by Fortress in Feb. 2007.
• GE looks for early exit in joint NBC. The latest details on the rumored NBC Universal (GE) / Comcast (CMCSA) tie-up claim GE would retain a 49% stake in a joint NBCU at a valuation of $30B, with 'put' options allowing it to sell parts of its stake to Comcast after 3.5 and 7 years. Comcast would contribute $4-6B in cash as well as its collection of cable networks to pay for its initial 51% stake. Meanwhile, Liberty Media (LCAPA) and News Corp. (NWS) are also said to be kicking NBCU's tires.
• Macau stocks slide. Shares of Macau-based casino operators fell Monday after the government said it is reviewing the industry's growth, and may initiate measures to curb growth including limits on the number of tables, banning slot machines from residential areas, and raising customer minimum age to 21. In Monday trading: MPEL -3.8%, WYNN -2.9%, LVS -1.8%, MGM -1.6%.
• U.K. mulls selling off chunks of itself. In a bid to reduce its debt, sources say the U.K. government is exploring a novel way to raise funds: bundling government services into commercial companies and selling or listing them. The companies could ultimately compete for outside contracts as well. On Sunday, PM Gordon Brown said a new scheme to sell £16B of government-owned real estate and assets "marks the beginning of a radical program" in which Britain will examine what other noncore state activities can be sold "in partnership with the private sector, including potentially through new forms of public service companies." (ETF: EWU)
• German sentiment weakens. German investor confidence unexpectedly dropped for the first time in three months, amid concerns its nascent recovery remains 'fragile.' ZEW's index of investor and analyst expectations fell to 56 from 57.7 in September (consensus 58.8). One economist, though, downplayed the miss: "A decline in investor confidence isn't that big a deal," DekaBank's Andreas Scheuerle said. "Analysts have given the recovery an early round of applause, which the economy has to live up to now. The recovery is still a fragile little plant but overall, it's doing well." (ETF: EWG)

Today's Markets

Asia markets moved higher Tuesday. Europe stocks are down, and futures are flat.

• Asia: Nikkei +0.6% to 10.077. Hang Seng +0.79% to 21,467. Shanghai +1.44% to 2,936. India was closed.
• Europe at midday: London -0.15%. Paris -0.3%. Frankfurt -0.4%.
• Futures at 7:00: Dow flat at 9822. S&P flat at 1072. Nasdaq +0.1%. Crude +1% to $73.97. Gold +1% to $1,068.30. 30-year bond +0.16% to 120-10. Euro +0.4% vs. dollar. Yen -0.1%.

Tuesday's Economic Calendar

• 7:45 ICSC Retail Store Sales
  8:55 Redbook Chain Store Sales
  10:00 Sen. Finance Committee: Debate on Healthcare Bill
  10:00 IBD/TIPP Economic Optimism
  2:00 PM Treasury Budget
  1:15 PM Fed's Dudley speaks
  12:45 PM Fed's Kohn: A View from the Fed
  5:00 PM ABC Consumer Confidence Index
• Notable pre-market earnings: DPZ, JNJ, NG
• Notable post-market earnings: ALTR, CSX, INTC, LLTC

Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.

After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.

Comments

[robert.b.fe...:]

So PM Gordon Brown is selling England by the pound. How much for Big Ben? Should the national park service sell naming rights to national parks and monuments? I can see it now: Siemens Grand Canyon Spa and Resort. This could be the break Soros has been waiting for. Now he can buy a 51% stake un the U.K.

Oct 13 09:08 AM

[Joseph L. S...:]

"Sources say Bank of America (BAC) has reversed course, deciding to waive attorney-client privilege and hand over "troves of documents" regarding legal advice it received during its acquisition of Merrill Lynch."

From "What? Us? We didn't do nuttin' wrong," to ""Well, if we did, the lawyers made us do it!" And we are supposed to find B of A leadership credible? In my company, the buck stops here, at my desk, as CEO. The lawyers work for me, not the other way around. At B of A, who is in charge...?

Oct 13 10:00 AM

[AndrewBaker:]

CIT's problems are just the visible part of the debt iceberg. Whilst CIT going down will have major repercussions for many, just think what the submerged greater than 90% part will do! With AIG, Barclays and others selling off bits, and the UK government contemplating the same, it certainly lets everyone know that world debt, at least in the first world, is a major problem and will be the source of financial uncertainty and problems for many years to come.

The markets will change to reflect these problems too, so do not get carried away with this massive bear rally we've been enjoying: stick with reality no matter how hard that may be right now. The time to get back into stocks is not yet here.

Oct 13 10:09 AM

[Anthony Alfidi:]

Corporate resistance to the overseas tax grab means more taxes are still coming - for the middle class. That's what the health care imbroglio is really about IMHO.

This CIT bankruptcy has an excessivley long denouement. Just get it over with already.

Regulators can pay all the lip service they want to cracking down on variations of HFT. They won't do anything until after a market crisis erupts. The past is prologue.

RailAmerica's disappointing IPO ought to give pause to all the resurgent bulls who think happy days are here again.

Oct 13 12:18 PM

[Annualgain:]

Don't look at everything in a vacuum. RailAmerica's IPO was a flop, but not because the economy isn't recovering. It was a flop because it was priced at an EV/EBITDA multiple of 11.8x (EBITDA is $130 million derived from 1H09 x 2). I would pay maybe 7x for a rail company and sell at 10x. That would mean buying at $3.60 and selling at $11, but this dog priced at $15. I mean, sheesh, even a quality name like BNI trades at less than 7x. Private equity is deluded if they think the stock investors will fix their problems by buying their over-priced deals once again. It's a new world, baby.

Oct 13 02:17 PM

[ebworthen:]

U.K. Selling government services - this is our future.

Govenrments with the power of taxation and increasingly property ownership (KELO vs. U.S. Supreme Court) selling it to corporations.

Banking and Corporate oligarchy in collusion with Governments that are supposed to represent individuals.

We are coming full circle; the monarchy and the Lords and Merchant class oppresing the peasantry has become Governments and Corporatocracies owning the income and property of individuals in exchange for a visit to the doctor and a loaf of bread.

Oct 14 11:12 AM