Wall Street Breakfast: Must-Know News

• Paulson's policing plans. U.S. Treasury Secretary Henry Paulson will present today plans for sweeping changes to the way financial markets are regulated. Paulson wants the Fed to be "responsible for overall issues of financial market stability," including "the responsibility and authority to gather appropriate information, disclose information, collaborate with the other regulators on rule writing, and take corrective actions when necessary." His blueprint includes merging the SEC and the CFTC.
• Implications of one market regulator. Lehman analyst Roger Freeman notes a combined SEC/CFTC would benefit stock exchanges (NYX, NDAQ) and hurt futures exchanges (CME, NMX, ICE). Futures exchanges have a looser and more friendly relationship with their regulator, the CFTC, than do stock exchanges with the SEC -- which has demanded more openness and competitiveness. The CME, which enjoys near dominance over many instruments, is likely to fight any changes in Congress.
• Study slays cholesterol drugs. Leading cholesterol drugs Vytorin and Zetia, jointly sold by Merck (MRK) and Schering-Plough (SGP), may have no benefit to patients according to a Sunday report in the NEJM. The Journal suggests people should stop using the medicines until they consult with their doctors, and estimate 2/3 of the 4 million patients (= $5B in sales) taking the drugs will move to other therapies. "We have had far too many patients on these drugs than the science supports," Dr. W. Douglas Weaver, a cardiologist and president-elect of the American College of Cardiology, said. Critics question whether the companies released the damning data in a timely fashion. Meanwhile, AstraZeneca PLC (AZN) said today it's stopping a clinical study of its cholesterol-lowering blockbuster Crestor early after the pill showed "unequivocal benefits" over a placebo.
• UBS may ask for more. With another $70B in toxic assets on its books and more writedowns in store, Zurich bank UBS (UBS) may turn up to its annual shareholder meeting on April 23 "hat in hand" and ask investors to support another capital increase to buffer its books. UBS has already taken in about $19B. The meeting's agenda is due out this Wednesday. Shares fell 3% in Swiss trading.
• Lehman scammed for $350M. Lehman Brothers (LEH) is suing a Japanese trading company, saying it was defrauded of $350 million through the use of forged documents. Lehman says the loss will not impact the firm, because of the lawsuit's merit, sufficient reserves, and insurance coverage. Hmm...
• Citi's new face. Citigroup will open a separate credit-card unit and revamp its consumer banking unit, splitting it into five geographical divisions (U.S., Asia, Western Europe, Central and Eastern Europe, Mexico and Latin America). "One should be supportive of major changes when past performance has been disappointing," one asset manager said. Hard to argue with that. Changes may be made public today.
• Fortune loses bid, saves a fortune. Fortune Brands (FO) lost its bid to acquire Absolut vodka distiller Vin & Sprit. French Pernod Ricard's $8.9B bid won the auction. Fortune had been seen as the bidder to beat, because it distributes Absolut in and outside the U.S. Pernod Ricard will likely have to pay a $473M penalty to break the distribution agreements.
• U2 to Madonna: I will follow. Concert promoter Live Nation (LYV) signed U2 to a 12-year exclusive deal that gives it rights to promote its performances, manufacture and sell its merchandise, and run its website. The deal does not cover distribution of recorded music or music publishing, unlike a recent $120M deal LYV signed with Madonna. Still, it gives Live Nation's planned TicketMaster (IACI) rival critical mass. Terms weren't disclosed, but Live Nation payed Madonna about $70M for similar rights. Keep in mind Live Nation has promoted and produced every world-wide U2 tour for more than 10 years, and already manages its website. Shares of LYV are worth about half of their October $23.36 before the Madonna deal was announced.
• M&A plunges. M&A banking fees fell a whopping 35% in Q1 -- to $8.7B from $13.4B. The value of announced mergers and acquisitions fell to $656.2 billion this quarter from $971 billion a year ago -- the slowest quarter in more than three years. "In this environment, it's difficult to see how anyone is going to launch a big strategic bid," a London analyst said. "As recently as three months ago, we thought we had seen the worst and it was going to begin to get slowly better... It only got worse," said another.
• Yahoo looks to Shine. Yahoo (YHOO) is rolling out a new website that focuses on women's day-to-day lives. Shine's sections: Fashion + Beauty, Healthy Living, Entertainment, Parenting, Love + Sex, Work + Money, Food, At Home, Astrology. It says it features "the best writers and bloggers in women's publishing."

Today's Markets

• Markets dropped sharply in Asia Monday. Nikkei -2.3% to 12,526. Hang Seng -1.88% to 22,849. Shanghai -3% to 3,472. BSE Sensex -4.44% to 15,644.
• In Europe, bourses are slightly lower at midday. FTSE -0.06% to 5,689.5. CAC -0.32% to 4,681. Dax -0.99% to 6,595.
• U.S. futures are down only slightly at 7:25 AM. Dow -0.28% to 12,202. S&P -0.17% to 1,317. Nasdaq -0.01 to 1,779.75.
• Gold is up 0.47% to $935.4. Oil is down 0.54% to $105.05. 30-year T-Bonds are up 0.09% to 118 41/64.

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Comments

[Richard Schweitzer]

Always an early morning "oughta" read.