Abandonment. A bond marketer said the current crisis in auction-rate securities "is not the finest hour of the investment-banking community," criticizing bankers for refusing to make a market. Now bankers have turned to recommending debt restructurings, "where they will earn yet another investment-banking fee."
Bond market guru speaks. Pimco's Bill Gross says value is returning to many parts of the bond market. "And if Washington gets off its high “moral hazard” horse and moves to support housing prices, investors will return in a rush."
Microsoft thinks Yahoo holds keys to Asia. One of the less-discussed reasons for Microsoft's (NASDAQ:MSFT) much-analyzed pursuit of Yahoo! (NASDAQ:YHOO) is due to the latter's established position in Asia, a market with greater growth potential than the U.S. Yahoo owns 34% of Yahoo Japan and has a seat on Alibaba's board. Microsoft may be thinking of closer integration between Yahoo Japan and Chinese Alibaba. In saying Microsoft's bid "substantially undervalues" Yahoo, CEO Jerry Yang cited "our substantial... investments in China and Japan... a market with enormous growth potential."
Take your time. The longer the proposed merger of Microsoft (MSFT) and Yahoo! (YHOO) drags on, the more Google (NASDAQ:GOOG) stands to gain, Susquehanna's Marianne Wolk says. "Google is likely to continue to see renewals and traffic wins as various players realize that because of the merger and the time that could take that neither Microsoft or Yahoo could catch up for some time."
FDIC prepares for bank failures. The FDIC, established during the Great Depression to protect depositors from bank failures, is preparing for the possibility of a major bankruptcy. "The notion that a bank is too big to fail shouldn't be out there," says FDIC's Jim Marino. In a report released yesterday, it notes that non-current loans exceeded the organization's reserves for the first time in 15 years.
Not everyone shuns mortgage debt. A growing number of investment firms, including BlackRock (NYSE:BLK), Fortress (NYSE:FIG) and Och-Ziff (NYSE:OZM), are scooping up residential mortgages at steep discounts in the hope of forcing payments by adjusting loan terms and/or reselling them for a profit.
Yet another iPhone hacker. AT&T (NYSE:T) may be forced to sell an untethered iPhone (NASDAQ:AAPL) if a new Democratic proposal becomes law. Every mobile provider "shall offer to consumers the opportunity to purchase subsidy-free wireless customer equipment," the draft (.pdf) reads. The proposal would also force carriers to allow penalty-free contract cancellation within the first 30 days. Mind you, when hit with similar legislation in Germany, T-Mobile sold contract-free iPhones for a paltry $1,460.
Squeezing the oily dollar. Russia, the world's number-two oil exporter, is quietly moving to shift trade in its oil from the dollar to the ruble. While the project's eventual success is far from a sure thing, such trends could impact the dollar percentage of oil importers' foreign reserves.
Advantage banks. Banks, who don't have to book leveraged loan losses immediately, hold a distinct advantage over brokers, who do. With pricing on leveraged loans at or less than 90 cents on the dollar, banks like JPMorgan & Chase (NYSE:JPM), Citigroup (NYSE:C) are likely to keep some of the loans on their books in the hope of better days, a luxury brokers like Lehman (LEH), Goldman Sachs (NYSE:GS), Merrill Lynch (MER) and Morgan Stanley (NYSE:MS) don't have. The flipside is that banks may be in more danger if they hold on to their losses even as the market continues to deteriorate.
All aboard. Carlyle Group founder David Rubenstein says this is one of the best times ever to invest. He says eight of Carlyle's top-ten investments were made in times of distress, but thinks buyers will have to wait until sellers come out of "denial" in order to get better prices. Banks will eventually start lending money again, he says, once they realize they are better off using their balance sheets for new ventures rather than holding on to old debt.
TV sales to flatten. "The gold rush... on flat-panel TVs is coming to an end," TV researcher Paul Gagnon says. After 4.6% growth in TV sales for 2007, analysts now predict only 3% growth this year. Impacted could be TV makers like Sony (NYSE:SNE) and Syntax-Brillian (BRLC); retailers like Circuit City Stores (NYSE:CC), Best Buy (NYSE:BBY) and Wal-Mart (NYSE:WMT); and component makers like Corning (NYSE:GLW).
Buying Take-Two just got more expensive. Take-Two Interactive (NASDAQ:TTWO) made "eyebrow raising" moves to boost compensation to management in the event of a takeover just a week after an initial $25/share bid by Electronic Arts (ERTS) (the bid has since been raised to $26). EA said it was surprised by the changes, and that its offer does not reflect share grants to ZelnickMedia, which runs Take-Two. Meanwhile, EA CFO Warren Jenson said he's not ruling out going hostile with its bid
It's all Bill's fault. "As the leading monoline, we are also a convenient and attractive target for self-interested parties such as Mr. William Ackman," MBIA (NYSE:MBI) CEO Jay Brown writes in a letter to shareholders. "[While] I am leading a regulated institution that provides security, jobs and peace of mind to tens of thousands of institutions and millions of individual investors. Mr. Ackman's objective is less complex; he will stop at nothing to increase his already enormous personal profits as he systematically tries to destroy our franchise and our industry."
SEC probes Office Depot. Reeling from a disappointing Q4, Office Depot (NASDAQ:ODP) is now being investigated by the SEC over alleged illegal communications with analysts. The SEC charges ODP warned analysts that weak economic conditions were hurting its sales days before it went public with the news. The SEC is also investigating its inventory accounting, the timing of vendor payments, and some inter-company loans.
Cut IT costs now - Gartner. "IT organizations should not wait for an official declaration that a recession has begun before undertaking IT cost-cutting efforts," Gartner research says. "As concerns increase for the near-term health of some of the world’s largest economies, those responsible for IT budgets can expect to receive mandates from senior executives to cut IT costs as part of an enterprise wide cost-cutting program."
In the Limelight. A source says the possibility of Microsoft (MSFT) acquiring Limelight Networks (NASDAQ:LLNW) is smaller than when the rumor broke a month ago, prior to Microsoft's courtship of Yahoo (YHOO). Source says Level 3 Communications (NYSE:LVLT) may emerge as a buyer of LLNW.