Wall Street Breakfast: Must-Know News

• EU casts shadow over Oracle's Sun. European antitrust authorities formally objected to Oracle's (ORCL) proposed $7.4B takeover of Sun Microsystems (JAVA), issuing a statement of objections that focuses on whether Oracle ownership of Sun's MySQL database software would reduce competition. The move doesn't necessarily mean the EU will reject the deal, but should delay the process. The U.S. Justice Department, which has already signed off on the combo, reiterated that the merger is "unlikely to be anticompetitive." Oracle, meanwhile, said the acquisition "does not threaten to reduce competition in the slightest," adding that the EC's concerns "reveal a profound misunderstanding of both database competition and open source dynamics."
• Lending standards loosen. A smaller percentage of banks tightened lending standards in Q3, according to the Fed's loan officer survey, but credit conditions remain far from a comfort zone. About 25% of banks tightened standards on good quality real estate loans, down from 75% in July 2008. Banks tightening standards for credit cards fell to 15% from 35% last quarter, the lowest percentage since April 2008. And 15% of banks tightened standards on commercial and industrial loans, down from 80% in October 2008. "We're back to just normally tight, not pathologically tight," says an economist.
• U.K. most at risk of AAA downgrade. The U.K. is most at risk among large developed economies of losing its AAA rating, Fitch said Tuesday, but the ratings service maintained its stable rating which it said "reflects our expectation that the U.K. government will articulate a stronger fiscal consolidation program next year." In response, U.K. Trade Minister Mervyn Davies insisted Britain's sovereign rating is "absolutely" safe, and said the government's "been very clear that over the next four years there's going to be a program to reduce the public debt level." In May, S&P put the U.K.'s AAA credit rating on negative outlook, saying it would make a decision after the government makes its intentions clear.
• Moody's sees AIG comeback. AIG (AIG) will be able to repay its $60B Fed credit line and "much or all" of the Treasury's $69.8B investment if financial markets stabilize, Moody's said Monday. In a vote of confidence for CEO Robert Benmosche's strategy of rebuilding some of the businesses AIG previously targeted for sale, Moody's said, "We believe that the slower approach to restructuring could help AIG to generate more favorable values from its business portfolio than would be the case under rushed asset sales."
• Employment trends turn corner. In perhaps the most bullish employment report since the onset of the recession, Conference Board reported its Employment Trends Index rose 0.7% to 89.3 in October from 88.7 last month. "The Employment Trends Index has likely turned a corner in September, and the historical relationship between the index and employment suggests that job losses will end in early 2010," the group said, adding, "While layoffs have certainly declined in recent months, we still expect to see employers adding hours to their existing workforce before hiring will strongly increase." The improvement was driven by positive contributions from measures of jobless claims, temporary hires, industrial production, and sales. Conversely, Gluskin Sheff's David Rosenberg said unemployment may hit a post-war high of 13% as growth stagnates. "This is going to be the mother of all jobless recoveries. At the beginning of the year, who was calling for unemployment to go up to 10%?"
• Hedge funds alive and well. Hedge fund assets may top the previous high of $2T by the end of 2010 as double-digit returns lure investors, Deutsche Bank says. "We fully expect to see material inflows into 2010 and beyond. The expected growth is reflective of continuing institutional demand for increased risk-adjusted returns in the face of low bond yields and disappointing passive equity performance." Global hedge funds have rebounded faster than expected, recovering to $1.53T in September from $1.33T in March, even as regulators turn up the pressure to increase scrutiny of the industry and amid some high-profile scandals.
• Barclays accused of huge Lehman heist. In a recent court filing, Lehman's creditors claim Barclays (BCS) received Lehman securities valued at $50B for just $45B in cash, accusing the U.K. bank of the "largest theft in banking history." Some Lehman executives who negotiated that deal, the complaint asserts, knew they would receive offers to work at Barclays, and received or were offered plump compensation deals. At the time, the deal was presented in bankruptcy court by Lehman's lawyers as a wash.
• Cadbury bitter at Kraft's bland offer. Kraft (KFT) took its offer for Cadbury (CBY) directly to shareholders, disappointing investors who had hoped Kraft would sweeten its original bid of 300p and 0.2589 new Kraft shares for each Cadbury share. Kraft said its proposal "offers the best immediate and long-term value for Cadbury's shareholders and for the company itself compared with any other option currently available, including Cadbury remaining independent." Cadbury, not surprisingly, recommended shareholders "emphatically" reject Kraft's (KFT) "derisory" offer, which it says "is worse than the proposal that the Board has previously rejected as fundamentally undervaluing Cadbury and its prospects," due to a drop in Kraft's share price. The cash and share offer originally valued Cadbury at £10.2B, but is now worth about £9.8B. Kraft now has 28 days to publish a prospectus on the offer for Cadbury shareholders, and 60 days to collect enough shares to clinch a deal.
• Google picks up mobile ad leader for $750M. In a push to expand its digital advertising empire to cellphones, Google (GOOG) agreed to acquire mobile advertising start-up AdMob for $750M in stock. AdMob is a leading seller of banner ads on iPhone apps and mobile-specific web pages; the acquisition could help establish Google as an early leader in the small but rapidly expanding mobile phone advertising business. Aggregate sales of mobile ads were just $160M last year.
• Madoff payback fund could swell. Settlement talks between Madoff trustee Irving Picard and lawyers for the estate of Madoff investor Jeffry Picower are making progress, with Picower's family lawyer saying discussions range between $2.4B (the amount Picower withdrew over the six-year recovery period allowed for the trustee’s claims under New York State law) and $7B (the total amount of his withdrawals over several decades). The estate is large enough to add at least several billion dollars to the $1.4B the trustee has gathered so far.

Earnings: Tue. Before Open

• HSBC (HBC): Q3 profit was "significantly ahead" of a year ago, in part due to the first drop in U.S. impairment charges in more than three years. "The more positive signals that we saw in the U.S. run-off portfolio in the first half have continued, with the result that our North American operations did not require any capital support from the group during the quarter. We should have further evidence by the year-end as to whether this is a sustainable trend." Shares +2.6% premarket. (PR, MW)
• JA Solar (JASO): Q3 EPS of $0.10 beats by $0.07. Revenue of $193M (+119.7%) vs. $136M. Shares +9% premarket. (PR)
• Tyco International (TYC): FQ4 EPS of $0.61 beats by $0.07. Revenue of $4.42B (-16.3%) vs. $4.32B. (PR)

Earnings: Mon. After Close

• Arena Pharmaceuticals (ARNA): Q3 EPS of -$0.38 misses by $0.04. Revenue of $1.7M (+20%) vs. $2.4M. (PR)
• Clear Channel Outdoor (CCO): Q3 EPS of -$0.10 misses by $0.02. Revenue of $661M (-19%) vs. $665M. Shares -0.1% AH. (PR)
• Electronic Arts (ERTS): FQ2 EPS of $0.06 misses by $0.01. Revenue of $1.15B (+2%) vs. $1.13B. Announces cost-reduction plan that will eliminate 1,500 jobs by the end of the first quarter (900 of them in development) saving $100M annually. Expects October is another down month. Shares -1.4% AH. (PR)
• Fluor (FLR): Q3 EPS of $0.89 misses by $0.01. Revenue of $5.4B (-4%) vs. $5.5B. Shares -6.2% AH. (PR)
• Hologic (HOLX): FQ4 EPS of $0.28 beats by $0.01. Revenue of $403M (-9%) vs. $400M. Sees Q1 EPS of $0.24-0.26 vs. $0.30 on revenue of $400M-405M vs. $414M, and full-year EPS of $1.15-1.19 vs. $1.24, on revenue of $1.625B-1.65B vs. $1.69B. Shares -4.4% AH. (PR)
• Lions Gate Entertainment (LGF): FQ2 EPS of $0.26 beats by $0.20. Revenue of $394M (+3%) vs. $375M. Shares +5.6% AH. (PR)
• Live Nation (LYV): Q3 EPS of $0.82 beats by $0.02. Revenue of $1.8B (+14%) vs. $1.6B. Expects Ticketmaster merger to close in Q1. Shares -1.3% AH. (PR)
• MBIA (MBI): Q3 EPS of -$3.50 misses by $2.45. Total consolidated revenue of $-620M, incorporating an $810M unrealized loss on insured credit derivatives. Shares -12.5% AH. (PR)
• McDermott International (MDR): Q3 EPS of $0.50. Revenue of $1.7B (+1%) vs. $1.5B. Shares +1.4% AH. (PR)
• Priceline.com (PCLN): Q3 EPS of $3.45 beats by $0.53. Revenue of $731M (+30%) vs. $694M. Sees Q4 EPS of $1.52-1.62 vs. $1.49 on sequential revenue gain of 24-28%. Shares +8.2% AH. (PR)
• Qiagen (QGEN): Q3 EPS of $0.26 beats by $0.03. Revenue of $260M (+13%) vs. $257M. Raises full-year EPS guidance to $0.88-0.90 vs. $0.85. Shares +3.8% AH. (PR)
• Rackspace (RAX): Q3 EPS of $0.06 misses by $0.01. Revenue of $162M (+17%) vs. $159M. Shares +0.4% AH. (PR)
• Sequenom (SQNM): Q3 EPS of -$0.24 beats by $0.04. Revenue of $9M (-21%) vs. $8.5M. Shares -4% AH. (PR)
• Silver Wheaton (SLW): Q3 EPS of $0.11 in-line. Revenue of $69.8M (+77%) vs. $76.4M. Shares +1.1% AH. (PR)

Today's Markets

Asian markets moved higher overnight following strong U.S. gains Monday. Europe markets are flat-to-slightly-higher at midday. Stock futures are slightly lower.

• Asia: Nikkei +0.6% to 9871. Hang Seng +0.3% to 22268. Shanghai +0.1% to 3179. BSE -0.3% to 16441.
• Europe at midday: FTSE +0.3% to 5249. CAC +0.1% to 3788. DAX +0.3% to 5634.
• Futures: Dow -0.2% at 10176. S&P -0.2% to 1089.50. Nasdaq -0.1%. Crude -0.2% at $79.27. Gold -0.1% to $1,100.30. Dec. 30-year Tsy +0.24% to 118-25. 10-year +0.18%. Euro -0.05% vs. dollar. Yen +0.2%. Pound -0.4%.

Tuesday's Calendar

• 7:45 ICSC Retail Store Sales
  8:55 Redbook Chain Store Sales
  8:55 Fed's Lockhart: Emerging Trends in Real Estate
  9:00 Conference: Cross-Border Insolvency Issues
  10:00 Job Openings and Labor Turnover
  10:00 Q3 Metro Home Prices/State Resales
  10:05 Fed's Yellen: The Outlook for the Economy and Real Estate
  11:15 Fed's Rosengren speaks
  1:00 PM Results of $25B, 10-Year Note Auction
  7:30 PM Fed's Fisher: Economy
• Notable premarket earnings: ARM, BZH, DSX, JASO, TYC
• Notable postmarket earnings: AONE, ATO, CLWR, PAAS

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Comments

[doubleguns:]

Conference Board reported its Employment Trends Index rose 0.7% to 89.3 in October.

A small and pathetic move up. A single match and we need a forest fire.

It is however something positive if we can continue. I am concerned that maybe some temporary employment for the Christmas season may be all we are seeing here. Once the Christmas season is over will be the "tell" that I am looking to see.

As far as jobs go we are getting nothing from the administration and idiots in congress, they are to busy stimulation special interests and bribes err, ummm "campaign contributions." Yea, that's what they call it in Washington.

Nov 10 07:44 AM

[User 344476:]

My bet is that the government will hire like crazy in 2010. Don't forget, it's an election year. Conditions must be as good as money can buy later next year or the dems will lose their opportunity to force their solutions on a less-than-willing public. They've been holding stimulus money back for that purpose. They'll open the flood gates every way they can get away with as 2010 progresses.

We'll pay heavily for it in 2011.

Nov 10 08:19 AM

[robert.b.fe...:]

Finally Monday earnings after the close look almost normal. "Beats." were on mostly positive numbers and "Misses." reflected negative numbers. Did some one set off a logic bomb? Tightening credit markets going to "Normal lending standards.". Would that be the new normal, the old normal or some sort of hybrid?

Nov 10 08:46 AM

[The Geoffster:]

Most of the stimulus money gets spent next year. Dems are hoping this will return them to Congress.

Nov 10 08:49 AM

[bottoms-up:]

"Conference Board reported its Employment Trends Index rose 0.7% to 89.3 in October."

Well, there is something in statistics called trhe Standard Error of Measurement (SEM). It is the band, up or down from the number being reported and that would be well within the SEM on something like that. This is outside of the outright lies and manipulations being used by companies and the government to pump the economy.

"My bet is that the government will hire like crazy in 2010."

Maybe... The other possibility is the government will get a harsh dose of reality after April 15, 2010 when they find out how much their revenues have been punched in the gut. The GAO, et.al. may inform them that keeping an economy on the government boob is not a sustainable answer to the crisis.

Nov 10 08:49 AM

[Old Trader:]

"Lending standards loosen. A smaller percentage of banks tightened lending standards in Q3, according to the Fed's loan officer survey, but credit conditions remain far from a comfort zone."

More "less bad = good"? Where have I heard this before?

Nov 10 09:06 AM

[tripleblack:]

Correct. And the current stack of trillion dollar piles of pork is primarily post-dated to about 2012, by an odd coincidence...

This is truly a herd of "honest politicians", aka, those that STAY bought...

Or at least so the leadership Hopes.


On Nov 10 08:49 AM The Geoffster wrote:

> Most of the stimulus money gets spent next year. Dems are hoping
> this will return them to Congress.

Nov 10 09:09 AM

[Old Trader:]

"Hedge funds alive and well."

As stated, a response to the current low return environment. I tend to follow this area fairly closely, not because I have any money in hedge funds, but as a way to see what the "smart money" is doing. One promising change, is that the big institutional investors are pushing for MUCH more transparency, lower fees, greater flexibility in redemptions, etc.

Nov 10 10:35 AM

[Anthony Alfidi:]

An AIG comeback "if" financial markets stabilize is a pretty big "if," so the taxpayer had best hope the Fed keeps ZIRP in place to support the phony recovery.

Barclays' theft of $5B from Lehman's creditors shows us the agency problem again. Lehman's managers put their own personal interests ahead of fiduciaries. What else is new on Wall Street? Maybe we need to scatter the Street's traders around the country and build brand new firms based on partnerships. That way execs risk their own capital on every decision.

Nov 10 10:42 AM

[Bob 123:]

And why not. It was a favorite tactic of the Neocons from 2000-2008, to periodically mail out checks, spend lots of money just prior to important election cycles, etc.
BushCo created a whole new government agency and all of it's attendant bureaucracy -- the Department of Homeland Security, which redundantly overlaps the functions of several other pre-existing government agencies.
What do you expect? News flash for you -- governments and politicians do that. No sense carping about it just because your favored political regime was tossed out for being the incompetent hacks that they were.
Work and advocate for campaign finance reform, if it bothers you so much.
Kind of sucks that the so-called "liberal" or "socialist" party in reality only became the "other party of big business".

On Nov 10 08:19 AM User 344476 wrote:

> My bet is that the government will hire like crazy in 2010. Don't
> forget, it's an election year. Conditions must be as good as money
> can buy later next year or the dems will lose their opportunity to
> force their solutions on a less-than-willing public. They've been
> holding stimulus money back for that purpose. They'll open the flood
> gates every way they can get away with as 2010 progresses.
>
> We'll pay heavily for it in 2011.

Nov 10 10:44 AM

[AndrewBaker:]

This latest financial crisis has made me think beyond just money and has started me considering more and living more a lifestyle where financial aspects do not rate so highly: and it's more satisfying, though hard to give up on certain behavior. One way to compensate is to deal less with and spend less time on government and regulatory requirements that frankly do me and mine no good at all and cost me time and resources that I begrudge spending on them. Less compliance with officialdom is not only rewarding in the extra time one has, but also very satisfying in itself. I commend it to everyone. Give it a try, and see how good it feels.

Nov 10 11:30 AM

[bbowen7:]

So glad that the UK Trade Minister will soon announce a "fiscal responsibility plan" for the next four years. It is called David Cameron and the Conservative Party which, by all accounts, will replace Labour in the first third of 2010. Who will bring forward the American "fiscal responsibility plan"?

Nov 10 02:03 PM

[spald_fr:]

Eli: "EU casts shadow over Oracle's Sun."

An Oracle predicts the eclipse of the Sun.

Nov 10 02:14 PM

[The Geoffster:]

Your comment reminds me of a certain casino operator who lamented that the problem with Louisiana politicians was that they didn't stay bought.


On Nov 10 09:09 AM tripleblack wrote:

> Correct. And the current stack of trillion dollar piles of pork is
> primarily post-dated to about 2012, by an odd coincidence...
>
> This is truly a herd of "honest politicians", aka, those that STAY
> bought...
>
> Or at least so the leadership Hopes.

Nov 10 02:34 PM

[ebworthen:]

Barclays accused of huge Lehman heist. In a recent court filing, Lehman's creditors claim Barclays (BCS) received Lehman securities valued at $50B for just $45B in cash, accusing the U.K. bank of the "largest theft in banking history."
======================...

LOL!!! No, no Lehman's creditors, the largest theft in banking history is clearly the FED actions during this crisis.

My children's grandchildren will not be able to pay off the Mr. T Trillions in debt they have given to Wall Street at 0% interest to redecorate branches (WaMu - Chase), acquire other banks, and pay for commercials on T.V. encouraging people to use their credit cards and go get in more debt.

What's $5 billion, honestly? That's pocket change of the bailouts and the GM and Chrysler takeover.

It is a penny in a wheelbarrow of 100's Timmy is pushing down Wall Street.

Main street gets potatoes and expired cheese from government storage, oh, and a tax bill to pay for it and GE smart grid and IBM medical databases and Carbon Credits for European investors.

Nov 11 01:29 AM

[Michael Clark:]

I think this is something we all should do. We're looking at another decade of sideways economic development and market gains. Better get satisfaction out of other parts of life, since the 'money phase' is winding down.


On Nov 10 11:30 AM AndrewBaker wrote:

> This latest financial crisis has made me think beyond just money
> and has started me considering more and living more a lifestyle where
> financial aspects do not rate so highly: and it's more satisfying,
> though hard to give up on certain behavior. One way to compensate
> is to deal less with and spend less time on government and regulatory
> requirements that frankly do me and mine no good at all and cost
> me time and resources that I begrudge spending on them. Less compliance
> with officialdom is not only rewarding in the extra time one has,
> but also very satisfying in itself. I commend it to everyone. Give
> it a try, and see how good it feels.

Nov 13 03:29 AM

[Michael Clark:]

Market rally running on vapors. Markets topping. Inverse ETFs, dollar, VIX bottoming and ready to rally. See report below:

seekingalpha.com/insta...

Nov 13 03:30 AM