Wall Street Breakfast: Must-Know News 15 comments
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- Most banks fail ratings test. Most major banks still don't have enough capital to comfortably maintain their credit ratings, S&P said Monday, releasing the first global comparison of risk-adjusted capital adequacy for the world's top banks. Mizuho (MFG), Citigroup (C), UBS (UBS) and BBVA all came in well below the global average RAC of 6.7%; Mizuho's was just 2%, Citigroup's was 2.1%, UBS's 2.2%, and BBVA's 5.4%. Banks with stronger than average balance sheets included HSBC (HBC) (9.2%) and Goldman Sachs (GS) (8.3%). In a swipe at widely-used tier-one and leverage ratios, S&P said they aren't consistently calculated or don't adjust for risks. "We do not believe that these two capital ratios, which are the most commonly used by market constituents, are sufficient to assess banks' risk-adjusted capital adequacy."
- U.S. economists upbeat. Reiterating its statement that "the Great Recession is over," the National Association for Business Economists (NABE) boosted its economic growth forecast for 2010 to 2.9%, up from the 2.6% the group predicted last month. However, NABE said it expects the jobless rate to remain stubbornly high, averaging 9.6% in Q4 2010, which should keep a lid on inflation as substantial labor slack and higher productivity gains cut labor costs. "Real GDP growth should also be enough to recover losses from the recession and return output to an all-time high by the end of 2010," it predicted.
- Dimon for Treasury Secretary? With support for Treasury Secretary Tim Geithner waning, JPMorgan (JPM) CEO Jamie Dimon is emerging as a potential successor, sources say. People who know Dimon say he "would love to serve his country," and note he has recently begun making frequent visits to Capitol Hill, and earlier this month published an op-ed that urged the government to allow large institutions that take big risks to collapse rather than receive government aid. Dimon has the support of outspoken bank analyst Dick Bove, who says the Treasury Secretary must be a person "who has earned respect on their own as a result of hard-won battles in finance to represent this nation... That is not Timothy Geithner. It is Jamie Dimon."
- Bullard wants more QE. St. Louis Fed chief James Bullard says the Fed should extend its program to buy mortgage-backed securities and agency bonds beyond the current March deadline in order to remain agile and respond to any weakening in the economy. "I would just like to keep them active at a very low level instead of saying we're shutting down," Bullard told reporters in New York. "Initially it would do nothing for the economy, but it would give the Fed the option to react to future news as it comes in." The Fed has said it will complete its planned $1.25T scheme by March, and recently reduced the agency-debt purchase ceiling to $175B from $200B.
- Microsoft, News Corp. plot Google block. News Corp's (NWS) Rupert Murdoch may yet have his way to make online viewers pay for content if talks he's having with Microsoft (MSFT) pan out. The two have reportedly discussed a tie-up wherein News Corp. would get paid to remove its news websites from Google's (GOOG) search engine. Microsoft, which relaunched its search engine as Bing this year, has talked with other online publishers about a similar move, as it looks for ways to grab market share from Google.
- Ciena connects with Nortel. U.S. network equipment maker Ciena (CIEN) upped its offer by more than $200M to $769M and edged out a joint bid by Nokia Siemens (NOK, SI) and private-equity firm One Equity Partners to buy Nortel's optical networking and carrier ethernet assets. The deal will more than double Ciena's turnover.
- Cadbury hopes for sweeter deal. Not to be left out, Nestle (NSRGY.PK) is thought to be considering a bid for Cadbury (CBY) to challenge Kraft's (KFT) $16.7B hostile offer and a potential counterbid by Hershey (HSY). According to one analyst, Nestle could "blow Kraft out of the water" if it executes an option to sell its majority stake in Alcon (ACL) to Novartis (NVS) for more than $20B come January. Cadbury Chairman Roger Carr told the Sunday Telegraph he would prefer a merger with Hershey rather than Kraft, but added both bids could fail if not sweet enough. Sources say Kraft is considering increasing its bid or offering more cash.
- Price tussle over NBCU. Talks between GE Corp. (GE) and Vivendi have reportedly ground to a halt as the two clash over how to assess the worth of NBC Universal, with a price difference of several hundred million dollars separating them. GE and Comcast (CMCSA) had hoped to announce a deal as early as Monday, but sources say this could now be at least a week away, or perhaps not at all if the French media company decides to pursue an IPO of its 20% stake in NBCU rather than sell it back to GE.
- Goldman lashes back at NYT. Lucas van Praag, spokesman for Goldman Sachs (GS), fired back at the New York Times over the weekend for suggesting in an article and editorial that Goldman had more AIG exposure than it let on pre-bailout, dismissing most of the statements as "speculative." He also took issue with the findings of a government report (.pdf) that said the Fed caved in to AIG's counterparties during the bailout. Goldman still insists its exposure was "close to zero." The Times editorial slammed Goldman for fleecing the American public and called on the firm to make a multi-billion-dollar gift to the federal Bureau of the Public Debt.
- BofA's Lewis may rule another day. Bank of America (BAC) out-going CEO Ken Lewis may stick around a few months later than his scheduled departure of Dec. 31 while the bank continues to hunt for a replacement, sources say. At least four external candidates, including Citigroup (C) director Michael O'Neill, apparently rebuffed approaches. BofA's board has suggested it may extend its search for a permanent replacement into 2010 if the directors can't settle on a candidate in the next four days. The list of prospects has reportedly been narrowed to two BofA executives and at least two outsiders.
- e-Bay in auction freeze-out. eBay (EBAY) is calculating the cost of a disruption to its auction process on Saturday after a surge in live listings prevented users from finding products on the U.S. and some international eBay sites. eBay said it will compensate sellers for affected listings. Saturdays typically account for about 11% of eBay's weekly sales, although this Saturday may be more painful given the upcoming holiday shopping period.
- Oil slick for Reliance. Reliance Industries, which owns the world's largest oil-refining complex, may pay $10-12B to buy bankrupt chemicals and fuel maker LyondellBasell Industries, which is based in Rotterdam. The acquisition by Reliance, listed in Mumbai, could be the biggest acquisition by an Indian company in two years. Analysts said the deal would instantly expand the company's presence in the U.S. and Europe.
- U.S. Healthcare bill faces possible split. The highly contentious U.S. healthcare bill cleared an important Senate hurdle over the weekend, garnering the 60 votes needed to open floor debate on the plan. But lawmakers warned that the bill still faces serious hurdles.
- Coca-Cola targets China. In a move aimed at tripling its sales to middle-class consumers in China, Coca-Cola (KO) is planning to more than double its number of bottling plants in the country over the next ten years. A company official, speaking to investors in Atlanta last week, said the company also planned to distribute more than six times as many Coke-branded coolers to retailers, bars and restaurants in China over the coming decade, employing an expanded sales force to reach an additional 4.7M outlets.
Earnings: Mon. Before Open
- Campbell Soup (CPB): FQ1 EPS of $0.87 beats by $0.06. Revenue of $2.2B (-2.1%) vs. $2.3B. Shares +3.1% premarket. (PR)
- LDK Solar (LDK): Q3 EPS of $0.27 beats by $0.37. Revenue of $282M (+23.5%) vs. $277M. Sees Q4 revenue of $280-310M vs. $259M consensus. (PR)
- Tech Data (TECD): Q3 EPS of $0.84 beats by $0.13. Revenue of $5.64B (-9.5%) vs. $5.33B. Sees Q4 sales up low-to-mid single digits Y/Y vs. consensus of -1.2%. (PR)
- Tyson Foods (TSN): FQ4 EPS of $0.28 beats by $0.02. Revenue of $7.21B (+0.2%) vs. $6.88B. Says F2010 "should be a much better year." Shares +1.8% premarket. (PR)
Today's Markets
Overseas markets were broadly higher Monday, sending futures up overnight.
- Asia: Hang Seng +1.4% to 22771. Shanghai +0.9% to 3339. BSE +0.9% to 17180. Tokyo was closed.
- Europe at midday: FTSE +1.4% to 5343. CAC +1.8% to 3796. DAX +1.7% to 5757.
- Futures at 7:00: Dow +0.9% to 10400. S&P +1.1% to 1102. Nasdaq +1%. Jan. crude +1.2% to $78.40. Gold +1.6% at $1,166. 30-year Tsy -0.1%. 10-year -0.13%. Euro +0.7% vs. dollar. Yen +0.1%. Pound +0.65%.
Monday's Economic Calendar
- 8:30 Chicago Fed National Activity Index
10:00 Existing Home Sales
1:00 PM Results of $44B, 2-Year Note Auction - Notable premarket earnings: BJS, CPB, LDK, TECD, TSN
- Notable postmarket earnings: ADI, ATW, HPQ, NUAN
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[The Times editorial slammed Goldman for fleecing the American public and called on the firm to make a multi-billion-dollar gift to the federal Bureau of the Public Debt.]
The Times knows the next bonus payout at GS will be huge and will cause public outcry. Tim Geithner looks as if he's the one who is going to take the fall.
Dems vote to move forward on health care put nukes (nuclear option) in the hands of Dems.
I don't know which one scares me more, senators with nukes or Iranians with nukes.
GS still trying to untrash their name. hahahahaha
And finally the most unbelievable story of the day, month, year, decade?
National Association for Business Economists (NABE)
stated..........
"Real GDP growth should also be enough to recover losses from the recession and return output to an all-time high by the end of 2010," it predicted."
That's some good stuff these guys are smoking!!!!
These are the same people who didn't see it coming, but know they have a crystal ball that is accurate. The remainder of the release sounds like they are hyping the "jobless recovery," we've all heard so much about.
We seem to be operating on a second bubble from government intervention in the markets and HOPE!
124 banks have failed!! We still have no clarity with all the other financial institutions that hold mortgages, auto loans, credit card debt and derivitve swaps!! Banks still are not lending money to individuals or small businesses.
Unemployment is still rising. The dollar is weaking and many dollars are going overseas in foreign investment.
More foreclosures, lack of job creation, lack of spending.......
I just don't understand. I know the trend is my friend but I see a big black hole under my friend!
Given that GS apparently has carte blanche access to the public's wallet, this is NO surprise.
I was starting to get conditioned. Thanks man.
>>> IBDG (in before doubleguns). I was starting to get conditioned. Thanks man.<<<
As we know, Doubleguns is an exceptional poster. My comment was sincerely submitted in good humor, as he has consistently beat me to the post.
Thanks Spald. Thumbs up to you.
Maybe Dimon does not want to serve his country so much as he wants to save the banking system from total wipeout.
Did it not take Chase a century to accumulate its first billion dollars, and then only four years to double that by being the banker in Vietnan, a war advocated by its chaiman?
Will Dimon pursue a policy of breaking down banks to smaller size that are big enough to fail, or will he want to close banks and then sweep its customers into the ever growing JP. Morgan Bank One Chase etc super bank with government backing?
Hopefully Dimon is being altruistic and will do what is best for the public and the republic, but so far bankers are only waging constant class warfare against everyone else.
OK, let's accept that it's "possible" for someone on Wall Street to experience remorse. Next, that it's "possible" they may feel just guilty enough to give up their $48 million a year job to take on a role in government. And that it's "possible" they aren't just pandering to the popular anger and might actually allow the occasional Not Too Big To Wail bank to fail ("possibly" into the waiting arms of JPM.)
Even if that were all possible -- isn't it just as possible we could hire someone who WASN'T a hungry fox to guard the henhouse? Who would begin the job with credibility rather than distrust?
Why must our Treasury Secretary come from Wall Street? Are there no Paul Volckers or Milton Friedmans or Alexander Hamiltons out there willing to put the needs of the American people above the markers they owe their cronies on Wall Street?
It's a rhetorical question. Of course there are...
www.bloomberg.com/apps...
"Economic growth will be unlike most post-recession periods with banks reluctant to lend, the personal savings rate lower, the labor market less cyclical, excess housing supply greater and state and local budget gaps larger, according to Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York. His forecast of 2.1 percent growth in 2010 is below the 2.6 percent median of 63 economists surveyed by Bloomberg News."
Nice to know that the serial dissemblers at eBay are still hard at work ...