Under The Radar News - Tuesday

by: SA Eli Hoffmann
  • Redstone looking to can CBS chief? Paramount's (NYSE:VIA) recent abandonment of CBS's (NYSE:CBS) Showtime in order to join hands with Metro-Goldwyn-Mayer and Lions Gate Entertainment (LGF) was CEO Philippe Dauman's retaliation for CBS CEO's Les Moonves refusal to sweeten a lowball bid to renew the Showtime/Paramount deal. Sources say CBS/Viacom chairman Sumner Redstone has privately told Dauman he's frustrated with CBS. Dauman wants to drive CBS's share price down so low that Redstone can justify firing Moonves. "Dauman's dream is to get rid of Moonves and put Viacom and CBS back together again," a source says. "This is all about Philippe kicking Les while he's down."
  • Imagine if the markets were down 37%. With 20% of companies' Q1 results now in, Y/Y earnings growth is down a collective 37%. The number may improve as hard-hit financials report early.
  • Profitable presidents. The S&P 500 averages a 14.5% annual gain during Democratic presidencies, compared to just 10.6% under Republicans. Each does better with an opposing Congress.
  • Emerging bull or dead cat bounce? The market's recent stop-and-go rallies are more reminiscent of a bear market bounce than an emerging bull, Ken Tower, chief market strategist at Covered Bridge Tactical, says. Nollenberger Capital Markets strategist William Gibson disagrees. He notes the S&P 500 (NYSEARCA:SPY) has bounced off three successively higher bottoms since mid-March.
  • Social war? The new developer sandbox for iGoogle (NASDAQ:GOOG) contains code for accessing friends' data and creating a friends' activity stream -- a sign Google wants to one-up Facebook and MySpace (NASDAQ:NWS) with a home page that rivals their social networking functionality.
  • iPhone IM. A recent patent filing indicates Apple (NASDAQ:AAPL) has laid the groundwork for iPhone real-time text chat and an SMS-like service. IM is one of the iPhone's most sorely-missed features.
  • Intel ventures into Taiwan's WiMAX. Intel (NASDAQ:INTC) is investing $500M in Taiwan's WiMAX industry, and plans further joint efforts with the Taiwanese government.
  • Speculation Palm (PALM) is about to begin testing a WiFi-equipped Treo 800w.
  • Macau halts new casinos. Macau government will not issue new casino licenses in the near future. The gaming industry has helped stabilize Macau's economy and improve its living conditions. Good news for incumbents Las Vegas Sands (NYSE:LVS), MGM Mirage (NYSE:MGM) and Wynn Resorts (NASDAQ:WYNN).
  • Fannie, Freddy warned to play by rules. Fannie (FNM) and Freddy's (FRE) regulator, Ofheo, says it will consider taking action against the GSEs if they don't follow newly adopted accounting rules to adjust their books to reflect changes of certain assets and liabilities every quarter.
  • Put up or punt. Sources say Wall Street wants UBS (NYSE:UBS) to justify its investment banking unit after a recent probe revealed potential conflicts of interest and an absence of risk management. UBS is the world's #1 wealth manager.
  • India growth may cool. India's Finance Minister P. Chidambaram says the country's growth rate could slow this year (to between 8% and 9%). He said he would consider export bans as a last-resort tool to cool inflation. On India as an investment (Ed: iPath MSCI India ETN (NYSEARCA:INP)), he said: "This still remains one of the most attractive markets for any investor. The question is no longer, 'Shall I invest in India?' The question is, 'Can I afford not to invest in India?'" Meanwhile, tighter IT budgets appear to be hitting Indian IT outsourcers such as Satyam Computer Services (SAY).
  • New private-equity fund overfunded. Warburg Pincus raised $15B for its biggest private-equity fund, surpassing its goal of $12B. Investors include GE Asset Management (NYSE:GE). "We're in emerging markets where returns are higher, and we have a significant involvement in growth transactions," a Warburg Pincus director said. He says it's still possible to fund LBO deals up to $3B -- after that it gets trickier. Warburg Pincus is the #4 U.S. private-equity pool, behind Blackstone Group (NYSE:BX), Goldman Sachs Group (NYSE:GS) and KKR.
  • Loan reserves: Next shoe to drop? Bank losses may soon 'graduate' from writedowns on complex debt securities to loan-loss reserves gone bad. "It's a good thing that banks have started to reserve more," Sandler O'Neill's Kevin Fitzsimmons says. "The bad news is that they are going to need those reserves." BofA (NYSE:BAC) shocked Wall Street with a $6B addition to its reserve Monday, while Oppenheimer's Meredith Whitney says she thinks Wells Fargo's (NYSE:WFC) reserve looks too low.
  • Emerging market oil appetite to outdo U.S. Emerging market demand for oil will exceed that of the U.S. for the first time ever in 2008, which lends credence to the argument a 2008 recession may not lead to the double-digit percentage drops in oil demand it has previously.
  • Unsourced speculation UAL (UAUA) is in violation of a debt covenant after its wide earnings miss.