Under The Radar News - Monday

by: SA Eli Hoffmann
  • More capital, new sources. Banks are expected to raise another $50-80 billion in capital over the next couple months, following RBS's (NYSE:RBS) £12B rights issue. While the previous round of fundraising was fed by SWFs, the coming bout appears poised to happen with the help of public share offerings.
  • Sell the financials rally - Morgan Stanley. Morgan Stanley told its clients this morning to sell the current rally in financial stocks. Analysts believe credit market woes are only in their "third inning," and that things will ultimately be worse than the 1990-91 recessionary environment. "We think it's a mistake to chase this rally," they write. "The risk is much greater that credit deterioration will accelerate and banks will raise more dilutive equity and cut dividends [more] than expected." Analysts think the following companies will cut dividends: BAC, C, FITB, KEY, STI, USB, WB and WFC. They think these banks will still need to raise more capital: C, FITB, PNC, STI, STT, WB and WFC.
  • BlackBerry: iPhone killer or fodder. While RIM (RIMM) researchers were quick to call an upcoming touchscreen BlackBerry an "iPhone killer," analysts remain reserved as to whether RIM can repeat its corporate dominance in the new consumer market for smartphones. "The vultures are circling," one researcher says, "There is this sense that the RIM franchise is under assault." Needham analyst Charlie Wolf says consumers, "who might have considered the BlackBerry, who don't have the e-mail urgency of a mobile professional, are going to start selecting the iPhone (NASDAQ:AAPL)... This isn't going to stop RIM, but it is going to slow them down."
  • Hannah Montana au natural. Walt Disney's (NYSE:DIS) billion-dollar Hannah Montana franchise may be in jeopardy after its 15-year-old star, Miley Cyrus, appeared topless (but covered) wrapped in a satin bedsheet in the June issue of Vanity Fair, igniting the outrage of many parents whose daughters idolize the singer. "I took part in a photo shoot that was supposed to be ‘artistic’ and now, seeing the photographs and reading the story, I feel so embarrassed," Cyrus said. "I never intended for any of this to happen and I apologize to my fans who I care so deeply about."
  • Storage REITs thrive. Storage REITS are up 31% this year, far exceeding the gains of all other property REITs, not to mention the broader stock market. Investors believe the demand for self-storage will swell as people lose their homes and are forced to rent more humble accommodations. Players include EXR, PSA, YSI, and SSS.
  • A rock and a hard place. ArcelorMittal (NYSE:MT), the world's largest steel producer, told U.S. contract customers it will begin assessing a rare $250-a-ton surcharge to existing contracts due to high raw material costs. Buyers, including Ford Motor (NYSE:F) and General Motors (NYSE:GM), may have choice but to pay up in light of a worldwide shortage. Other steelmakers are likely to increase prices or add surcharges following the move. Carmakers will be left with the catch-22 of swallowing the cost, or trying to recoup it from an already feeble U.S. consumer.
  • iControl. Sources say that according to code found in the latest firmware release, Apple (AAPL) is developing a new iPhone application called iControl that will allow the iPhone to connect, browse through and play media on local iTunes libraries.
  • Chavez talks tough. Venezuelan President Hugo Chavez is threatening to expropriate its largest steelmaker, Sidor, if the company fails to reach an agreement over its nationalization "in the coming hours." Sidor is 60% owned by Ternium (NYSE:TX). "I will not pay $4 billion for that company," Chavez said. "If they do not want to reach an agreement with us, on Tuesday I will sign an expropriation decree and take immediate control of the company."
  • Google optimistic a Yahoo deal would pass scrutiny. Google (NASDAQ:GOOG) thinks regulators would not bar a potential business venture with Yahoo (YHOO), because it would be "non-exclusive," falling short of an outright merger, a source says. Regulators are questioning the companies after Yahoo completed a two-week test of Google's ad-selling system alongside Yahoo search results. Analysts say a tie-up would give the two 80% of the search-ad market.
  • Wachovia faces drug laundering inquiry. U.S. lawmakers are investigating Wachovia (NASDAQ:WB) in a broad probe of alleged drug-money laundering, sources say. Wachovia and some other banks cut off their relationships with Mexican foreign-exchange companies late last year after authorities began their inquiries.