Wall Street Breakfast: Must-Know News

• Fannie, Freddie boost anti-foreclosure efforts. New efforts by Freddie Mac (FRE) and Fannie Mae (FNM) to forestall foreclosures by modifying mortgage terms will be a boon for loan-servicing companies - whose fees for restructuring 'workouts' jump to $800 from $400. It remains unclear, however, whether in many case the measures are simply delaying the inevitable. "It seems they would rather pay servicers to keep the losses rolling into the future even if close to a majority of borrowers redefault because they are unable to handle the mortgages," analyst Joshua Rosner says. Short-sale fees, paid when a lender agrees to accept less than the full amount owed when a home is sold, double to $2,200 from $1,100.
After you finish reading Wall Street BreakfastSeeking Alpha's Market Currentswill keep you current all day long.
• Debt dealers disappearing. The number of brokers dealing in U.S. Treasury bonds dropped to 19 - the lowest since 1960, and down from a peak of 46 in 1988. Once JPMorgan (JPM) finishes swallowing Bear Stearns, that will fall to 18. Fewer firms means sloppier auctions, money manager Mark MacQueen says. "The taxpayer and the government are paying more no matter what happens." It's also ironic considering the estimated 2009 U.S. deficit of $482B - the highest ever. In 1960, America was burdened with a $300M surplus.
• Top exec says NBC stays with GE. GE (GE) has no plans to put NBC Universal on the block - even after the Olympics - chief marketing officer Beth Comstock says. She also says GE is on track to double its China revenue to $10B/year by 2010.
• TNK-BP CFO quits. TNK-BP (BP) CFO James Owen resigns. Says ongoing stakeholder conflict makes it too difficult to serve his duty.
• Citi shuttering final Tribeca arm. Sources say investor redemptions are forcing Citigroup (C) to reel-in a $400M convertible arbitrage fund - the last step in winding down its $2B Tribeca Global Investments group. Strangely, the fund was down less than 5% this year.
• Murdoch says TV network ads strong. "Our advertisement on television and the internet is very, very good - except for local television," News Corp. (NWS) CEO Rupert Murdoch said Monday. "Cable networks are all sold out for 12 months."
• Is KKR eyeing Lehman? KKR's recent decision to go public may be the prelude to acquiring a hedge fund or financial company - perhaps Lehman (LEH). KKR could also use its new shares as currency to pick up a capital-markets unit from a troubled broker on the cheap.
• Hedge funds flounder. Hedge funds are poised to post their worst monthly performance in six years. Some previously high-profile funds are being hit with double-digit drop; several are now down more than 20% for the year. "It was a comeuppance month," hedge fund investor Jay Krieger says. Many funds were hit by soaring oil prices that took a toll on their holdings. "We hadn't anticipated how strong commodity pricing would be in an economic environment we felt was so weak," Boyer Allan's Nicholas Allan says.
• AOL discussions likely to heat up. Talks for AOL (TWX) may get more serious this week, after parent Time Warner finalizes the framework for splitting off its dial-up ISP business from its internet advertising and content business. Uncertainties as to how that would play out have thus far made it difficult to assign AOL a value, holding back merger/acquisition discussions. Sources say TWX continues to hold informal talks with Microsoft (MSFT) and Yahoo! (YHOO). Investors will scrutinize TWX earnings this Wednesday for clues as to the health of AOL's ad business amid a U.S. slowdown.

Earnings: Monday Before Open

• Cooper Tire & Rubber (CTB): Q2 EPS of -$0.38 misses by $0.11. Revenue of $773M (+5.9%) vs. $725M. [PR]
• EchoStar Communications (DISH): Q2 EPS of $0.73 beats by $0.13. Revenue of $2.9B (+5.4%) in-line. [PR]
• HSBC (HBC): H1 net profit of $7.72B, in-line, vs. $10.9B a year ago. Loan impairment charges $10.01B vs. $6.35B last year. "The outlook for the near term remains highly challenging with significant uncertainty. Globally, consumer confidence is declining." Shares -1.8% in London. [WSJ]
• Humana (HUM): Q2 EPS of $1.24 beats by $0.06. Revenue of $7.35B (+14.4%) vs. $7.14B. [PR]

Today's Markets

• Asia Monday: Nikkei -1.23% to 12,933. Hang Seng -1.52% to 22,515. BSE -0.54% to 14,578.
• Europe at midday: London -0.1%. Paris -0.1%. Frankfurt -0.9%.
• U.S. futures. Dow -0.16%. S&P -0.16%. Nasdaq -0.34%. Crude -0.13% to $124.94. Gold -0.29% to $914.80.

Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.

Comments

[whidbey:]

Eli

did you miss the rumor that the SPR might be opened? God knows what it means, but probably pure politics, it can make no difference in the IT supply of Petro. Woe is us.

2008 Aug 04 12:00 PM

[r.toole@hot...:]

well, who are the loan servicing companies that will benifit from fannie and freddie's new decision? do you think they would be a good stock investment? thanx robert

2008 Aug 04 12:27 PM

[foreclosure...:]

So it looks like the Fannie/Freddie bailout legislation is just another excuse for servicing companies and lenders to make more money from foreclosure victims? How unbelievably unsurprising.

I wonder what interest KKR has in Lehman, though. KKR was rumored to be suffering from cash flow problems a few months ago; taking over an investment bank might solve that problem going forward.

2008 Aug 04 01:00 PM

[messy:]

Wonder if KKR likes Lehman Bros. because most its spies are there from past years, who told KKR which companies are best buyouts Like (SAFEWAY). It would make interesting reading I am sure.

2008 Aug 05 05:55 AM