Wall Street Breakfast: Must-Know News 14 comments
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- AIG bailout was muffed. TARP Special Inspector Neil Barofsky said in a report Monday that the New York Fed mishandled the AIG (AIG) bailout by paying its trading partners in full, where it would have been possible to negotiate partial payments. The Fed didn't use its leverage in negotiations, Barofsky complained, including failing to stress that its participation in the process was purely voluntary. In a response letter, the Fed said the terms of the $85B AIG bailout were appropriate given the severity of the crisis, and that leaning on domestic institutions would have been a "misuse of our supervisory authority" and provided an advantage to foreign institutions.
- Bernanke gives mixed signals. The recent pickup in the economy "reflects more than purely temporary factors" and continued moderate growth is likely, Fed Chairman Ben Bernanke said in a speech Monday, though constrained lending and weak labor market remain headwinds to robust growth. Inflation expectations haven't responded to upward or downward pressures, he said, noting plenty of resource slack. Bernanke pledged that low-interest, loose monetary policies would continue for an extended period. In a follow-up Q&A, Bernanke said it's "not obvious" that asset prices are out of line, at least inside the U.S., and that "we can never say never" on using interest rates to deflate bubbles, adding we won't have a "real market-based financial system until it's safe to let a financial firm fail."
- Smelling danger, banks respond. The Financial Services Forum, a lobbying group for 18 of the world's largest financial firms, urged House Financial Services Committee Chairman Barney Frank not to pursue big bank break-up legislation, an idea attracting interest in Congress and causing alarm on Wall Street. In a letter a day before Frank's panel resumes debate on financial reform legislation, the group stressed that size alone does not make firms risky: "The problem is not that some institutions are too large. It's that there is currently no legal authority to unwind, in an orderly way, a failing financial conglomerate."
- U.S. opens door for China banks. Chinese and U.S. regulators are negotiating an agreement aimed at encouraging Chinese firms to buy into small and medium-sized U.S. banks, sources say, something Chinese bankers complain has been difficult for them in the past. The shift highlights how the global financial landscape has been redrawn post crisis, with cash-rich Chinese banks now a force to be reckoned with on the world scene.
- UBS urges patience. UBS (UBS) CEO Oswald Gruebel asked investors to be patient, assuring them the bank was on the come-back track. "We have stabilized UBS's financial condition but we still have some serious topics to address," Gruebel insisted. The bank has fixed a goal for pretax profit at around 15 billion Swiss francs ($14.89B) in the next 3-5 years. In a reference to the bank's history of helping rich foreigners evade taxes, which led to a damaging legal tussle with the U.S. government, Gruebel said he was building "a new UBS: one that performs to the highest standards and behaves with integrity and honesty."
- Obama and Hu set different priorities. At a press conference in Beijing Tuesday, President Obama and Chinese President Hu Jintao had different priorities for economic action. Obama stressed the need for economic balance: "[We need] a strategy where America saves more, spends less, that reduces our long-term debt, and where China makes adjustments... to rebalance its economy and spur domestic demand," Obama said. Hu, on the other hand, thought protectionism was a priority. "I stressed to President Obama that under the current circumstances our two countries need to oppose all kinds of trade protectionism even more strongly."
- Japan, eyeing bond sales, plans new budget. The Japanese government announced plans for a new budget, seeking to maintain economic stimulus measures to support the economy. But the government may have to cut back on some election spending promises if it seeks to keep bond issuance below ¥44T yen ($494B) in the coming year. There is already pressure on government bond yields as declining tax revenues suggest more extended issuance may be necessary.
- GMAC chief ousted by board. GMAC CEO Alvaro de Molina was asked to resign by the board after only 19 months at the helm. GMAC had been preparing a request for additional bailout funds from the Treasury. GMAC director Michael A. Carpenter, who will replace de Molina, has said that he will review the need for that request.
- GM loses $1.5B, but repays loans. General Motors posted a $1.5B loss for Q3, but announced it would repay $6.7B of its $50B government bailout, at the rate of $1B per quarter. Analysts said GM’s results showed a healthier balance sheet, ample cash, and factory production much more in line with consumer demand.
- BOE director says better keep stimulus. Bank of England director Andrew Sentance, a member of the rate setting committee, said on Tuesday that emergency stimulus measures for the U.K. economy had better remain in place for an undetermined period. "We have to be open-minded" about more quantitative easing, Sentance added, even though he thought that the recession in the U.K. had come to an end.
- Fed’s Kohn sees no asset bubbles. Fed Vice Chairman Donald Kohn said in a speech Monday that there was no sign of an asset bubble being caused by the low interest-rate policies the central bank was pursuing. Kohn pointed out that the central bank's loose monetary policies were intended to help investors move into riskier assets.
- U.K. inflation rises. The U.K. Consumer Price Index jumped to 1.5% from a five-year low of 1.1%, the Office of National Statistics said on Tuesday. Food prices pushed the index higher; economists say it's likely only a temporary spike.
Earnings: Tue. Before Open
- Canadian Solar (CSIQ): Q3 EPS of $0.69 beats by $0.15. Revenue of $213M (-15.6%) in-line. Shares +5.1% premarket. (PR)
- Covidien (COV): FQ4 EPS of $0.72 beats by $0.02. Revenue of $2.7B (+0.3%) in-line. (PR)
- Home Depot (HD): Q3 EPS of $0.41 beats by $0.05. Revenue of $16.36B (-8%) in-line. Sees 2010 EPS of $1.55 vs. $1.53 consensus. Same-store sales -6.9%. "There is still a great deal of pressure in the housing and home improvement markets, though there are some positive signs of stabilization." (PR)
- Jacobs Engineering Group (JEC): FQ4 EPS of $0.63 misses by $0.05. Revenue of $2.55B (-20.1%) in-line. Sees 2010 EPS of $2.00-2.60 vs. $2.83 consensus. (PR)
- Melco Crown Entertainment (MPEL): Q3 EPS of -$0.08 beats by $0.01. Revenue of $500M (+69.5%) vs. $520M. Shares -4.5% premarket. (PR)
- Saks (SKS): Q3 EPS of $0.01 beats by $0.12. Revenue of $631M (-8.5%) vs. $624M. SSS -10.1.%. "We believe there is more stability and predictability in our business compared to twelve or even six months ago; however, the overall environment remains challenging." Shares +3% premarket. (PR)
Earnings: Mon. After Close
- Assured Guaranty (AGO): Q3 adjusted EPS of $0.44 beats by $0.13. Revenue of $389M (+161%) vs. $338M. Shares -0.2% AH. (PR)
- Pacific Sunwear of California (PSUN): Q3 EPS of -$0.17 beats by $0.03. Revenue of $268M (-17%) vs. $260M. Sees Q4 EPS of -$0.28 to -$0.35 vs. -$0.11. Shares -11.2% AH. Update 4:54 p.m.: Shares -18.8% AH. (PR)
- Sina (SINA): Q3 EPS of $0.34 beats by $0.03. Revenue of $96.4M (-9%) vs. $99.5M. Sees Q4 revenue of $93M-96M vs. $99.5M. Shares +4.8% AH. (PR)
Today's Markets
Asian and European markets were mixed Tuesday, leaving futures flat after a light-volume overnight session.
- Asia: Nikkei -0.6% to 9730. Hang Seng -0.1% to 22914. Shanghai +0.2% to 3283. BSE +0.1% to 17051.
- Europe at midday: FTSE -0.3% to 5366. CAC -0.3% to 3853. DAX -0.2% to 5793.
- Futures: Dow, S&P and Nasdaq all flat. Dec. crude -0.6% to $78.45. Gold -0.7% at $1,131. 30-year Tsy -0.21% to 120-19. 10-year -0.17%. 5-year -0.12%. Euro -0.5% vs. dollar. Yen +0.1%. Pound -0.3%.
Tuesday's Economic Calendar
- 5:30 Fed's Yellen: Lessons from the Crisis
7:45 ICSC Retail Store Sales
8:30 Producer Price Index
8:55 Redbook Chain Store Sales
9:00 International Capital Flow
9:15 Industrial Production
10:00 Results of $75B, 28-Day TAF Auction
10:00 Hearing: BofA-Merrill Lynch Merger
10:00 Markup: Investor Protection Act
10:15 Fed's Lacker: Economic Outlook
11:00 Hearing: Financial Stability Improvement Act
12:30 PM Fed's Pinalto speaks
1:00 PM NAHB Housing Market Index
3:00 PM Hearing: U.S. and the G-20
5:00 PM ABC Consumer Confidence Index - Notable premarket earnings: CSIQ, COV, DDS, HD, JEC, MPEL, SKS, TGT, TJX
- Notable postmarket earnings: ADSK, CRM, LZB
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Not acceptable. Pay it all back!!!
"18 of the world's largest financial firms, urged House Financial Services Committee Chairman Barney Frank not to pursue big bank break-up legislation."
Banking Lap Dog Barney Frank will do all he can to save those 18 banks against the peoples wishes and we the people need to raise holy hell, starting here!!!!
Time to break up the TBTF's then remove Barney Frank in 2010.
On Nov 17 07:58 AM doubleguns wrote:
> "General Motors posted a $1.5B loss for Q3, but announced it would
> repay $6.7B of its $50B government bailout"
>
> Not acceptable. Pay it all back!!!
>
> "18 of the world's largest financial firms, urged House Financial
> Services Committee Chairman Barney Frank not to pursue big bank break-up
> legislation."
>
> Banking Lap Dog Barney Frank will do all he can to save those 18
> banks against the peoples wishes and we the people need to raise
> holy hell, starting here!!!!
>
> Time to break up the TBTF's then remove Barney Frank in 2010.
Temporary? yea right only because they have only just begun to takeoff.
The problem is not that "There is currently no legal authority to unwind, in an orderly way, a failing financial conglomerate." The problem is that outfits like this lobbying group want us to think inside that box...let financial institutions do what they do, and then if they fail, unwind them in an orderly fashion. No. A better model would be to treat them as utilities, providing a most essential service, but with sensible restrictions. No electric company would be allowed to take the sort of risks that mega-banks routinely take, nor to pay the salaries & bonuses they routinely pay. The arrogant, insulated risk-taking is what has to be brought under control.
Gee, there's a surprise. Big banks, having mismanaged, bungled, ruined, botched or made a mess of everything they've touched, invested in or been entrusted with, now want us to believe we shouldn't act to protect ourselves in the future.
Sort of like the usual criminal response when standing over a dead body with gunshot residue on their hands and a smoking gun: "I didn't do nuthin' wrong! It isn't my fault! The law was unclear! I had a terrible childhood!"
Blah...
Blah...
Blah.