Wall Street Breakfast: Must-Know News

by: SA Eli Hoffmann
SA Eli Hoffmann
Seeking Alpha's flagship daily business news summary, gives you a rapid overview of the day's key financial news. It is published before 7:00 AM ET every market day and delivered to over 900,000 email subscribers.

  • AIG steward threatens to jump ship. Just three months after taking the job, AIG (NYSE: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 (NASDAQ: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 (NASDAQ: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 (NYSE: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 (NYSE: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 (NYSE: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 (NYSE: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 (NYSE: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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