Gramm: Glass Steagall Repeal Irrelevant

Phil Gramm, the former Republican Senator from Texas who co-wrote the act that undid Glass-Steagall, has our DQotD:

>

“I’ve never seen any evidence to substantiate any claim that this current financial crisis had anything to do with Gramm-Leach-Bliley. In fact, you couldn’t have had the assisted takeovers you had. More institutions would have failed.”

>
Your dumb Quote of the Day is sponsored by Cognitive Dissonance, a Nasdaq Company . . .

>
Sources:
Wall Street Faces ‘Live Ammo’ as Congress Aims to Unravel Banks
Alison Vekshin and Robert Schmidt
Bloomberg, November 12 2009
http://www.bloomberg.com/apps/news?pid=20601109&sid=az7AcisnxsCA&pos=11


AOL Reportedly Shopping ICQ, Mapquest

In a pair of posts, AllThingsD is reporting that AOL has hired bankers to shop both ICQ, the pioneering instance messaging service, as well as Mapquest.

Kara Swisher reports that AOL has hired Allen & Co. and Morgan Stanley to find a buyer for ICQ, and is reportedly seeking $300 million for the business, which AOL bought in 1998 for $287 million, plus another $125 million in earnouts for the execs. She notes that ICQ, while a laggard in the instant messaging space in the U.S., is the leader in the category in Germany, Russia, Ukraine and Israel (where ICQ is based.)

Meanwhile, she also reports that Mapquest also could be for sale; the company had acquired the mapping site for $1.1 billion stock in 1999. She says Microsoft (MSFT) could be a buyer for the site.

AOL, which will be spun off from Time Warner (TWX) next month, this morning said it be reducing its staff by about one third.

Facebook prepping for an IPO, as value reaches nearly $10 billion

Filed under:

Wednesday's strong IPO of Fortinet is yet another sign that investors are warming up to early-stage deals -- especially of fast-growing companies.

So does this mean we'll see a public offering of a company like Facebook?

Maybe so. According to Bloomberg News, there has been lots of activity in the private shares of Facebook, which have spiked 42% over the past couple months. The valuation now comes to about $9.5 billion.

Continue reading Facebook prepping for an IPO, as value reaches nearly $10 billion

Facebook prepping for an IPO, as value reaches nearly $10 billion originally appeared on BloggingStocks on Thu, 19 Nov 2009 10:30:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments

Add to digg Add to del.icio.us Add to Google Add to StumbleUpon Add to Facebook Add to Reddit Add to Technorati

BofA Brass Stands by Their Man Moynihan

If some of the powerful Democrats in Congress were in charge of picking the next Bank of America chief executive, Brian Moynihan’s candidacy would be in trouble.

Bloomberg News
Brian Moynihan testifies before Congress on Tuesday.

After Moynihan’s testimony before the House Committee on Oversight and Government Reform on Tuesday, the BofA executive was criticized by New York Democrats Edolphus “Ed” Towns and Elijah Cummings.

Towns, the committee chairman, said Moynihan “didn’t show the kind of leadership a company would seem to need.” In the hearing, Towns painted Moynihan as a lackey of current CEO Kenneth Lewis and suggested Moynihan was made general counsel only to sign off on BofA’s attempt to scuttle its deal to acquire Merrill Lynch last winter.

For his part, Cummings said he found Moynihan’s testimony unconvincing.

But in today’s Boston Globe, the men who will officially decide whether Moynihan will become CEO praised the candidate’s performance in Congress. “Brian had a tough assignment,” the Globe quoted Thomas May, a BofA director who is on the CEO selection committee. “When you are in a leadership position, you sometimes find yourself in these situations, and he met the challenge just fine.”

Lewis told the Globe through a spokesman that Moynihan, who lives near Boston and who runs BofA’s consumer-banking unit, was “clear, poised, and persuasive.’’

So, BofA is standing behind its man, but will that be enough to overcome his unpopularity with some powerbrokers in Washington. After all, these days Beltway folks have unprecedented influence over struggling corporations such as BofA, which has received $45 billion in taxpayer funds. After initially approving $25 billion for BofA and Merrill last fall, Washington had to pony up $20 billion in additional funding to cover unexpected loses at Merrill.

For his part, Moynihan testified that he was “proud” of the Merrill Lynch acquisition, which he said was completed not only for the good of BofA shareholders, but for the good of the country.

No matter how persuasive Moynihan was in telling Congress that he acted in good faith during the Merrill Lynch deliberations, there could be too much bad blood between anyone involved in the Merrill Lynch deal and those Washington who feel like they were snookered into approving more bailout money for BofA.

Congress may not have an official role choosing the next BofA CEO. But given its sway over a company whose fate hinges on government assistance and regulation, Congress’ unofficial vote has to be considered.


Merrill Turns Cautious On Chips, Foundries; Many Downgrades; Stocks Swoon

Bank of America/Merrill Lynch chip analyst Sumit Dhanda this morning turned cautious on semiconductor stocks, downgrading a slew of stocks; his colleague Daniel Heyler made a comparable on the foundries, lower ratings on a number of stocks.

“We are downgrading our view on the sector given unfavorable indications from our cyclical framework,” he writes. “In particular, our industry model suggests that following a period of rapid replenishment of inventory and normalization of semi shipments to true consumption levels, inventories in the supply chain are approaching a level suggesting a modest overshoot versus equilibrium levels. While we see limited risk to near-term estimates, we think the longer this persists the great the risk of a correction in the supply chain. Barring a sharp upturn in the global economies, this, in our view, renders the risk reward associated with ownership of chip stocks unattractive.”

Here are Dhanda’s downgrades:

  • Intel (INTC): To Neutral, from Buy.
  • LSI (LSI): To Neutral, from Buy.
  • Microchip (MCHP): To Underperform, from Neutral.
  • Marvell (MRVL): To Neutral from Buy.
  • Maxim (MXIM): To Underperform, from Neutral.
  • National Semi (NSM): To Underperform from Neutral.
  • Power Integrations (POWI): To Underperform, from Neutral.
  • Texas Instruments (TXN): To Neutral from Buy.

“To be clear,” Dhanda writes, this is not a call on demand. Rather, he thinks that barring an upside surprise in demand, “the percentage play is to take some money off the table,” ahead of an inventory adjustment that he thinks will “likely be modest and quick.”

Meanwhile, Heyler writes that he is “turning cautious on the semiconductor contract manufacturing sector as the disparity between wafer shipment/supply growth and inventory/consumption is widening,” creating risk of a weak first half in 2010.

Here are Heyler’s downgrades:

  • United Microelectronics (UMC): To Underperform, from Buy.
  • Advanced Semiconductor Engineering (ASX): To Underperform from Buy.
  • ASM Pacific (0522.HK): To Underperform from Buy.
  • Kinsus (3189.TW): To Underperform from Buy.
  • Taiwan Semiconductor (TSM): To Neutral from Buy.
  • Siliconware (SPIL): To Neutral from Buy.
  • Chipbond (6147.TW): To Neutral from Buy.
  • Semiconductor Manufacturing International (SMI): To Underperform from Neutral.
  • Nan Ya PCB (1303.TW): To Underperform from Neutral.

In today’s trading:

  • Intel is down $1.08, or 5.4%, to $19.04.
  • Texas Instruments is down $1.13, or 4.4%, to $24.62.
  • National Semi is down 93 cents, or 6.5%, to $13.45.
  • Marvell is down $1.12, or 7%, to $14.97.
  • Microchip is down $1.37, or 5.1%, to $25.40.
  • Maxim is down 96 cents, or 5.3%, to $17.27.
  • LSI is down 22 cents, or 3.9%, to $5.48.
  • Taiwan Semi is down 31 cents, or 2.9%, to $10.47.
  • Siliconware is down 34 cents, or 4.6%, to $7.
  • SMIC is down 6 cents, or 1.9%, to $3.14.
  • UMC is down 24 cents, or 6.3%, to $3.55.

An island reversal in MDY

With a gap up on Monday and a gap down on Thursday morning, the S&P 400 MidCap ETF (MDY) has an island reversal working on the 30-minute chart. There were no trades around 127.6, which creates a floating island around 128. Even though this gap is negative, MDY landed right at support from last week's low. Further weakness would reverse the short-term uptrend.



091120mdy Click this chart for details.

WSJ.com: Real Time Economics 2009-11-19 08:08:42

A roundup of economic news from around the Web.

  • Credit and Recovery: On voxeu Prakash Kannan examines how the availability of credit will affect the recovery. “Will the economic recovery be U-, V-, W-, or L-shaped? This column warns that recoveries from recessions caused by financial crises are slower than others, due to stressed credit conditions that persist even after output begins to recover. It thus recommends policies aimed at recapitalising financial institutions, resolving distressed financial assets, ensuring adequate provision of liquidity, and expediting bankruptcy proceedings.”
  • TARP Accomplishments: Writing for Economix, Simon Johnson looks at what the TARP accomplished. “There is no question that passing TARP was an essential element in restoring confidence. In some countries, the government has the authority to provide fiscal resources directly to the banking system on a huge scale, but in the United States this requires Congressional approval. In other countries, foreign loans can be used to bridge any shortfall in domestic financing for the banking system, but the United States is too large to ever contemplate borrowing from the International Monetary Fund or anyone else. But if any country provides unlimited government support for its financial system, while not putting orderly bankruptcy-type procedures in place for insolvent large institutions, and refusing to take on serious governance reform and downsizing for major troubled banks, it would be castigated by the United States and come under pressure from the I.M.F. At the heart of every crisis is a political problem — powerful people, and the firms they control, have gotten out of hand. Unless this is dealt with as part of the stabilization program, all the government has done is provide an unconditional bailout. That may be consistent with a short-term recovery, but it creates major problems for the sustainability of the recovery and for the medium term. Serious countries do not do this. Seen in this context, TARP has been badly mismanaged.”
  • Eggo Shortage: Donald Marron wonders what will happen to eggos after following an announcement that supply is running low. “My question: How will stores and shoppers respond to this shortage? Will grocery stores raise Eggo prices? If they do, will they be denounced as Eggo price gougers? And if not, will there be empty shelves in the refrigerated breakfast section? And what about consumers? Will they rush out to hoard Eggos today, thus exacerbating the near-term shortage? Will a black market in Eggos emerge? I’d be interested to hear what you see when you are next doing field research in a grocery store. Of course, in this day-and-age, there’s an even faster way to gauge the Eggo-consciousness of America: check out the stream of Eggo tweets over at Twitter… Judging by a quick skim of the several hundred Eggo-related tweets in the past few minutes (!), I would say that (a) some consumers will indeed hoard Eggos, (b) some are joking about hoarding Eggos and then putting them up on eBay, and (c) a few consumers are looking at the bottom of their freezers to see if they have any Eggos to sell. Ah, a good old supply response in the face of a shortage.”

Compiled by Phil Izzo


J. M. Smucker Net Up; D.R. Horton Net Loss

The J. M. Smucker Company second quarter sales rose 52% to $1.28 billion and net income rose 172% to $140.0 million or $1.18 a share. D.R. Horton, Inc fourth quarter revenues fell 42.3% to $1.01 billion and net loss was $231.9 million or 73 cents a share.

GameStop FY Q3 Edges Estimates; Q4 View In Line

GameStop (GME) this morning reported slightly better-than-expected results for its fiscal third quarter ended October 31.

For the quarter, the video-game retailer posted revenue of $1.83 billion, up from $1.7 billion a year ago, and ahead of the Street at $1.73 billion. EPS of 31 cents a share was ahead of the Street at 30 cents. While new game sales were up 9.4%, and used game sales were up 19.4%, comp store sales were down 7.8% due to lower hardware sales.

For FY Q4, the company sees comp store sales down 1%-7%, with EPS of $1.47 to $1.65, which is consistent with the Street at $1.57. For the full year, GME sees $2.45 to $2.63; the Street has been forecasting $2.53.

GME this morning is up 20 cents, or 0.8%, to $24.29.


Jack in the Box may not be a trade after Q4 report

Filed under: , , ,

Jack in the Box (JACK) dropped in yesterday's after-hours session upon news of the company's Q4 results. You can't blame the bottom line for the poor stock performance. The fast-food joint earned 70 cents per share from continuing operations versus the 45 cents per share from continuing operations earned in the comparable quarter. Did such a growth rate deserve a nearly 6% cut in share price? Analysts were only looking for 55 cents per share, according to Earnings.com.

Well, Wall Street apparently wasn't satisfied with the outlook, as this Reuters article points out. Traders are obviously more concerned with where Jack in the Box may be heading as opposed to where it's been.

Continue reading Jack in the Box may not be a trade after Q4 report

Jack in the Box may not be a trade after Q4 report originally appeared on BloggingStocks on Thu, 19 Nov 2009 09:45:00 EST. Please see our terms for use of feeds.

Read | Permalink | Email this | Comments

Add to digg Add to del.icio.us Add to Google Add to StumbleUpon Add to Facebook Add to Reddit Add to Technorati

Suntech Q3 Results Beat Estimates

Suntech (STP) this morning posted better-than-expected Q3 results.

The China-based solar company reported Q3 revenue of $473.1 million, up 47.4% from the $321 million reported in Q2, and well ahead of the Street at $426.6 million, though down from $594.4 million a year ago. Profits of 16 cents per ADS were twice the Street estimate of 8 cents. Gross margin was 17.8%, down from 18.6% in Q2.

The company said it now expects full year shipments of 640-660 MW, up from a previous estimate of 600 MW. Suntech sees Q4 shipments up at least 10% from Q3, with relatively flat gross margins sequentially. In 2010, the company sees shipments up at least 75%. The company sees capital spending of about $200 million next year, up from $120 million in 2009.

STP this morning is up 64 cents, or 4%, to $15.70.

SLOW BURN

The danger is not the past, but the future.

Today’s update on weekly jobless claims may be the warning sign. New filings for jobless benefits were unchanged last week, hovering at 505,000, matching the previous week’s tally. Although this number is down sharply from it’s recessionary peak of 674,000, set back in late-March, 500k reflects distress in the labor market. In other words, job growth is largely MIA.

It’s too soon to tell if the drop in claims is stalling. But there’s a case to be made that the big, easy reductions are behind us. As we discussed many times this year, there was always a strong case that a snapback on multiple economic and financial levels was in the offing for 2009. Unless the system was truly headed for a collapse, the natural order of the business cycle was righting itself after such a sharp deviation from equilibrium. In short, much of the events in 2009, particularly since the spring, aren’t a huge surprise to students of economic history. But the world is likely to become increasingly nuanced and complicated, and not necessarily for the better.

We’ve commented often in 2009 that the main threat was a stalled rebound in the job market. The risk was less about a double dip recession and another cataclysm and more of meager growth in the all-important labor market. Today’s data point in jobless claims isn’t proof that our forecast is turning into reality, but neither does the latest number do anything to dispel our worry of what may be looming.

Deals of the Day: Moynihan Leaves Washington Panned and Praised

Deals of the Day gathers all the biggest news of the morning related to mergers and acquisitions, bankruptcies, financing and private equity. Deal Journal’s homepage is http://blogs.wsj.com/deals. You can see real-time updates of our posts and our favorite deal-related articles on other Web sites through our Twitter feed at http://twitter.com/wsjdealjournal.

Mergers & Acquisitions

Birds Eye Foods: The largest frozen-vegetable company in the U.S. is expected to be acquired for more than $1.3 billion by Blackstone’s Pinnacle Brands. [WSJ]

Cadbury-Kraft-Hershey: Cadbury said it would consider takeover bids but hasn’t received one. Hopes of a bidding war pushed up the confectioner’s shares after Hershey and Ferrero said they might bid. [WSJ]
Related: In entering the Cadbury fray, Ferrero is shedding the insular style that has guided the company for more than a half a century. [WSJ]

Cazenove: J.P. Morgan is buying the half of the blue-blooded firm it does not already own for £1 billion. [The Guardian]

Playboy: Private equity firm Oak Hill Capital Partners said it is not interested in buying the men’s magazine publisher. [Associated Press]

Morgan Stanley; MUFG: Mitsubishi UFJ Financial Group, Morgan Stanley scale back a merger of Japanese units, and MUFG plans to issue $11.2 billion in new shares. [WSJ]

Mitsubishi Rayon: Mitsubishi Chemical Holdings Corp. said Thursday it will acquire Mitsubishi Rayon Co. through a tender offer and stock swap, in a deal that could be worth more than $2 billion. [WSJ]

Financial Institutions

Finding Lewis’s successor: Did BofA’s Brian Moynihan’s chances of taking the helmof BofA survive his day on Capitol Hill? [Boston Globe]

Buyside

Citadel: Hedge-fund titan Kenneth Griffin lost $8 billion of his clients’ money last year. Now, he is trying to persuade investors to trust him with more as he launches new funds. [WSJ]

Galleon: A defendant accused of exchanging a case of cash for inside information has ties to Galleon’s former No. 2 executive — the first link between a top executive at the hedge fund and smaller-time players. [WSJ]

Stanford: The university has received bids totaling more than $1 billion for its large block of hard-to-sell investments that it put up for sale last month. [WSJ]

The future of the buyout industry: Private equity firms will need to become more like asset managers, offering buyouts as just part of their portfolio, or else focus tightly on specific sectors in order to prosper. [Reuters]

Bankruptcies & Restructurings

Simon Property: The mall giant has hired investment adviser Lazard and law firm Wachtell, Lipton, Rosen & Katz to help it formulate a strategy for possibly bidding for all or part of rival General Growth Properties Inc., which is operating under Chapter 11 protection. [WSJ]

JAL: Delta Air Lines and its SkyTeam alliance partners said that they would provide a $1.02 billion funding package to lure Japan Airlines from the rival Oneworld alliance. [WSJ]

People & Players

Joseph Bae: Earlier this year, the private-equity investor helped helped his firm, KKR, seal a $1.8 billion acquisition of Oriental Brewery Co. Earlier this month, he aided in a decidedly posher acquisition — a 760-gram white truffle from the city of Alba. [WSJ]

Capital Markets

The Obama administration wants to fast-track GM’s IPO and it could come as soon as the fourth quarter of 2010. [Reuters]


AOL To Cut Staff By A Third

AOL disclosed in an SEC filing this morning that it plans to reduce its staff by about a third, via voluntary and and involuntary job reductions. The move is part of a cost-reduction program as the company prepares to return to the public markets via a spin-off from Time Warner (TWX). The goal of the cuts are to cut annual operating costs by about $300 million. As previously disclosed, the company expects to incur up to $200 million in restructuring charges for the program, all to be take from the date of the spin through the first half of 2010. The cuts amount to about 2,500 people.

The Wall Street Journal notes that CEO Tim Armstrong will “surrender” his 2009 bonus, which was supposed to be $1.5 million to $4 million.

The AOL spin is scheduled for April 9.


Early MBS Color

**Mortgages not particpating much in rally and are wider by ~1
to 1.5bps across the stack.  Higher dollars bring origination
and MBS have had trouble finding clearing levels with 4.5’s
north of 102.  Better selling yesterday also has an overhang in
the market and we expect mortgages to lag given the amount of
orignation and paper floating around over the last couple
session.  15yrs have cheapned and provide a better alternative
for those lookign to stay invovled in MBS.


Crisis Porn: SocGen Says ‘prepare for ‘global collapse’

As long as I am here in Europe, I might as well give you some flavor of what has become known as Recession Porn: The most dire forecasts expecting the most egregious outcomes.

Today’s “Crisis Porn” comes to us via Société Générale by way of the UK’s Telegraph, and its Pretty grim:

“In a report entitled “Worst-case debt scenario”, the bank’s asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.

Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of “deleveraging”, for years.

“As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse,” said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.

Under the French bank’s “Bear Case” scenario, the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.

Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.

Note that the report is a “worst case scenario.” That’s your recession porn for the day . . .

>

Source:
Société Générale tells clients how to prepare for ‘global collapse’
Ambrose Evans-Pritchard
Telegraph, 6:12PM GMT 18 Nov 2009
http://www.telegraph.co.uk/finance/economics/6599281/Societe-Generale-tells-clients-how-to-prepare-for-global-collapse.html