Wall Street Breakfast: Must-Know News 13 comments
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- AIG steward threatens to jump ship. Just three months after taking the job, AIG (AIG) CEO Robert Benmosche has told the board he's ready to quit. Insiders say Benmosche feels compensation restrictions imposed by pay czar Kenneth Feinberg have left him in an impossible situation, without the ability to retain talent. Benmosche's own $10.5M package is the largest approved under the Treasury Department's recent curbs on executive pay. A departure could be highly disruptive, but it's not altogether clear whether the threat was serious, or was meant to ruffle feathers; insiders say Benmosche made a similar threat in August. As far as a possible replacement - how about Ken Lewis?
- Bad trades aren't criminal. A jury found two Bear Stearns fund managers did not lie by presenting an upbeat picture while their funds plunged in value, a setback for lawmakers hoping for easy convictions in the wake of bailouts and foreclosures. Investors lost $1.6B when Bear funds, managed by Ralph Cioffi and Matthew Tannin and heavily invested in mortgage-backed securities, collapsed in the summer of 2007. Jurors said that while the pair clearly made some bad investments, their salesmanship did not cross the line into fraud.
- Strong dollar critical to recovery - Geithner. Treasury Secretary Tim Geithner said Wednesday that maintaining a strong dollar is "very important" for the economy. Speaking to Japanese reporters, Geithner said, "We bear special responsibility for trying to make sure that we are implementing policy in the U.S. that will sustain confidence not just among American investors... but investors around the world" that the U.S. will fix its budgetary problems as its economy improves. Geithner also said he sees no contradiction between a strong dollar and the desire to bolster exports.
- World Bank frets U.S. joblessness. World Bank president Robert Zoellick warned Wednesday that untamed U.S. unemployment threatens to trigger loan defaults and drag on consumption, hobbling a nascent recovery. "You're going to have problems with delinquencies of credit card loans, consumer loans, people won't be able to pay their mortgages," he told reporters in Singapore. "Some banks are going to continue to be troubled by bad loans." While Zoellick concedes government stimulus spending will fuel growth through the middle of 2010, he's worried what happens afterward: "What's the other source of demand?"
- Logitech buys LifeSize, gains foothold in videoconferencing. Logitech (LOGI) agreed to buy privately-held LifeSize Communications, a developer of high-definition video systems, audioconferencing equipment, and video management software, for $405M, bolstering its position in the much-prized video communication market. LifeSize Communications has more than 9,000 video conferencing customers. On Tuesday, Cisco (CSCO) revealed that most shareholders in videoconferencing developer Tandberg had spurned its $3.1B takeover offer.
- Dodd unveils rival financial overhaul. Sen. Chris Dodd, who chairs the Senate banking committee, unveiled a 1,136 page plan to overhaul financial regulations that is substantially different from plans discussed in the House and favored by President Obama. Dodd's plan calls for removing the Fed and FDIC from day-to-day supervision of banks, opting for a new two-pronged agency, one branch to monitor and diffuse systemic risks posed by large financial companies, and the other to regulate smaller banks. Conversely, the SEC would see its power and budget increase by allowing it to keep fees it collects from Wall Street firms, instead of relying on Congress. With fewer than 20 days left in the legislative session, it's almost certain Congress will not deliver on President Obama’s request to repair the financial regulatory system by year-end.
- GM's chairman clashes with CEO. In a growing clash between GM CEO Fritz Henderson and his board, GM's chairman Ed Whitacre said he's not comfortable with management's 2010 forecasts, and indicated Henderson's timetable for an IPO - the second half of 2010 - may be too optimistic. Rather than worrying about selling shares, the former AT&T chief says the company's focused on repaying the $6.7B it owes to taxpayers. In an interview with the Wall Street Journal, he said management needs to make progress on such issues as reducing customer-sales incentives, changing perceptions about GM, and constructing a realistic business plan.
- Global confidence dips. Confidence in the world economy dropped in November after some central banks took or spoke about steps to start unwinding emergency stimulus. Bloomberg's Professional Global Confidence Index fell to 60.3 from 61.7 in October. At well above 50, optimists still outnumber pessimists, but their confidence "hinges almost entirely on the level of stability produced by extraordinary monetary support," one economist who participated in the survey said.
- United on verge of GE security purchase. United Technologies (UTX) in nearing a purchase of GE's fire alarm and security systems unit for at least $1.8B, and a deal could be announced as early as Thursday, sources say. GE's security unit includes Edwards Systems Technology, which GE bought for $1.4B from SPX Corp. (SPW) in 2005. The Edwards business offers building management systems that help control commercial structures during fires, earthquakes and other emergencies, and would take United "beyond just perimeter and access security," one analyst says.
- Blackstone, KKR prepare to sell TDC stake. Sources say Blackstone (BX), KKR and three more private-equity firms that bought an 88% stake in Denmark's TDC are preparing for an exit. The group bought the stake in 2006 with about $3B in cash and $12B in debt; it's thought to be worth about $7.4B today.
- Credit card issuer fails. Advanta (ADVNA), a large issuer of credit cards to small businesses, filed for bankruptcy after massive customer defaults led to an unsustainable capital shortfall. Advanta has assets of $363M and debts of $331 million. It said it has almost $100M in cash, but cannot meet all its obligations.
- China exports recover some more. China's exports continued to improve, falling 13.8% in October vs. a 15.2% decline in September and 20%-plus drops earlier in the year. Chinese authorities have begun urging banks to be more cautious in lending, and today the PBOC warned "definite expectations of inflation have formed in the market." The fall in China's consumer prices narrowed to 0.5% in October from 0.8% in September, and is widely expected to turn positive in coming months.
- Mortgage mod program picks up speed. The Treasury said Tuesday one-in-five eligible homeowners have now enrolled in its mortgage-modification program, although few of the trial modifications are turning into permanent fixes. Treasury's Making Home Affordable program has now initiated 650,000 loan modifications, up from 500K in late September. "The program is having a pronounced impact in areas particularly hard hit by the housing crisis," Treasury's Barr said in a statement.
Earnings: Wed. Before Open
- ING Group (ING): Q3 net profit of €778M vs. €229M last quarter and -€568M a year ago. CEO Jan Hommen said ING wants to repay the remainder of the €10B in rescue funds it received, and plans to pay back €5B before year-end. Shares +6.4% premarket. (PR)
- Macy's (M): Q3 EPS of -$0.03 beats by $0.04. Revenue of $5.28B (-3.9%) in-line. Sees Q4 EPS of $1.00-1.05 vs. $1.17 consensus. Sees Q4 SSS down 1-2% vs. -2.7% consensus. Shares -2.7% premarket. (PR)
Earnings: Tue. After Close
- A123 Systems (AONE): Q3 EPS of -$1.78 may not compare to consensus estimates of -$0.33. Revenue of $23.6M (+3%) vs. $19.2M. Shares -3.5% AH. (PR)
- Atmos Energy (ATO): FQ4 EPS of -$0.17 misses by $0.09. Revenue of $1.35B (+2%) vs. $1.32B. Shares -2.5% AH. (PR)
- Clearwire (CLWR): Q3 EPS of -$0.43. OIBDA of -$198.8M. Revenue of $69M (+13%) vs. $67M. Revenue comparison to Sprint's WiMAX business in prior year. Shares -1.2% AH. (PR)
Today's Markets
Asia stocks were mostly higher Wednesday. Europe is sitting on healthy gains, and futures are higher.
- Asia: Nikkei flat at 9872. Hang Seng +1.6% to 22627. Shanghai -0.1% to 3175. BSE +2.5% to 16850.
- Europe at midday: FTSE +1.2% to 5292. CAC +1.2% to 3830. DAX +1.3% to 5687.
- Futures: Dow +0.7% at 10287. S&P +0.8% to 1100. Nasdaq +0.8%. Dec. crude +0.5% to $79.50. Gold +1.2% to $1,115,60. Treasurys are flat. Euro +0.3% vs. dollar to $1.503. Yen +0.1%. Pound -0.4%.
Wednesday's Calendar
- Veterans Day - stock/futures markets open, bond markets closed.
- Notable premarket earnings: FLO, M
- Notable postmarket earnings: AAP, AMAT, CSC, CTRP, GMCR
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This article has 13 comments:
Dodd knows exactly what he is doing and is delivering tricks for the special interests (big banks) that keep him around as their lap dog.
This rubbish about excessive pay to retain talent must stop: there are plenty of people out there with real talent who will work for far less than some of the pampered financial workers we've had in the past and still have now; and they are just as good, if not better, and won't constantly moan about pay and threaten to go elsewhere (though who would want them beats me).
Do a fair day's work for a fair day's pay, and then we'll soon see how quickly we can get back to a sound financial footing.
On Nov 11 07:40 AM doubleguns wrote:
> Dodd torpedoes bank reform. Watch what they do not what they say.
> This is a perfect example of Washington games. No chance for bank
> reform this year now.
>
> Dodd knows exactly what he is doing and is delivering tricks for
> the special interests (big banks) that keep him around as their lap
> dog.
Turbo Tax Timmy can lie out of BOTH sides of his mouth. The US government implements "qualitative easing" and purposely devalues the dollar to avoid deflation, while broadcasting to Asia we are pro-strong dollar.
Can someone quantify just exactly what they mean by talent? Does that mean hiring the best looking folks, or the biggest Connivers, or are they talking about pert's like jet planes and expansive 3 martini lunches or is it they want to hire rocket scientists to build us another house of cards?
The economy and the nation is an 85 year old with stomach cancer and a failing heart who insists that they are about to learn skydiving, go back to college, and write a novel.
AIG Steward to jump ship - really? Can I shove him off the plank?! Hey Benmosche! Can I help move you out of your office? Let's take the back staircase. Pay for talent!?!? Is greed and a complete lack of ethics a talent? Is gambling with other people's money they gave you for safekeeping a talent? If that is talent we should be hanging priests and teachers. @!*%#@!!@%^&^!!!!!!!!
Geithner got where he is by being a two-faced liar; telling people what they want to hear for his own gain - equivocating, mind-numbing doublespeak, the backbone of a jellyfish, and the heart of frozen corpse of a soul that went straight to Hell; just like our politicians and banking oligarchs.
In short, moral and ethical adults are not in charge; we are ruled by Nero's and Jezebel's.
MOST of AIG continued to be well run and still is. MOST of AIG has been continuously profitable. MOST AIG emplloyees are good, competent people.
I know you're angry about the bailouts. I am too. But let's keep the comments accurate. And the part of the AIG bailout that makes me furious is that the ONLY reason our "leaders" bailed AIG out was that Goldman Sucks was counterparty to many of AIG's derivatives and would have taken huge losses if AIG failed. The AIG bailout was really a GS bailout.
The underlying belief of our "leaders" is that what's good for GS is good for America. It was wrong when they said it about GM and it's wrong about GS too.
No doubt there are good people who work at AIG - but they were not in charge.
AIG should not have been saved. NONE of them should have been saved.
As long as we reward failure and immoral behavior we by proxy punish the good people at AIG and the responsible individuals and investors who are the foundation of any society.
This kind of bull$hit gives capitalism and private investment a bad name and gives Marxists fuel for their fire.
Equivocation and moral relativism is the road to HELL and we need to get off that road NOW.
On Nov 11 10:50 AM axelrod608 wrote:
> Come on, commenters, lets get at least a little accuracy and objectivity
> in the AIG controversy. Almost all of AIG was well run by competent
> employees. AIG was gutted by ONE division that played fast and loose
> with highly leveraged derivatives that went south, all the way to
> financial Antarctica.
>
> MOST of AIG continued to be well run and still is. MOST of AIG has
> been continuously profitable. MOST AIG emplloyees are good, competent
> people.
>
> I know you're angry about the bailouts. I am too. But let's keep
> the comments accurate. And the part of the AIG bailout that makes
> me furious is that the ONLY reason our "leaders" bailed AIG out was
> that Goldman Sucks was counterparty to many of AIG's derivatives
> and would have taken huge losses if AIG failed. The AIG bailout was
> really a GS bailout.
>
> The underlying belief of our "leaders" is that what's good for GS
> is good for America. It was wrong when they said it about GM and
> it's wrong about GS too.
In related news, the ghost of Hunter S. Thompson affirms his support for sobriety.
juxtaposed with:
Speaking to Japanese reporters, Geithner said, "We bear special responsibility for trying to make sure that we are implementing policy in the U.S. that will sustain confidence not just among American investors... but investors around the world"
The wrong guys were being prosecuted.