Lehman Sues Japan Firm, Claiming $350 Million Fraud (WSJ)
There's a million ways to lose money. Here's one of the more interesting ones we've been paying attention to. Lehman claims that employees of a Japanese firm fraudulently bilked Lehman out of $350 million. Their method of action: using official company documentation to suggest that it was behind a hospital refurbishment funding project. Turns out the Japanese company Marubeni Corp had no idea about it. So now Lehman is suing for its cash back. Whether they get it back or not, you have to figure that Lehman's counterparty (so to speak) in this fraud, must've had a damn good idea about how this whole process works to pull something like this off.
Citizen Huff (NYT)The redhot Huffington Post continues to make the media rounds, jumping form the New Yorker to the New York Times for its latest glowing profile. Actually, it started even earlier when some (possibly dubious) numbers came out that the site was bigger than Drudge. It helps that it's election season and there's an added hook to write about a politically-oriented site. But really. Financially, the site expects revenues between $6-$10 million this year, on what sounds like breakeven profits. Oh, and they found some guy to say it was worth $200 million.
Aloha Airlines Halting Passenger Service (AP)We've long been in the "more bankruptcies" camp when it comes to airlines, hoping that they'll lead to more gates/opportunities for interesting upstarts. That being said, seeing as we're not too big on the intra-Hawaii island-hopping scene, it's hard to get real excited about the end of Aloha Airlines. After 60 years, the company recently declared bankruptcy, and now it's shutting down operations for good.
HUD Secretary Expected to Quit (WSJ)There's something about HUD secretaries. Always seemingly getting up to no good. Yesterday we couldn't have named our current one, but today we know his name is Alphonso Jackson and he's expected to quit amidst some vague allegations of wrongdoing. The Journal describes this as a blow to Bush's attempt to fix the housing mess. Eh, somehow we doubt that this position isn't so crucial to the situation.
UBS Falls After Reports It May Have to Raise Capital (Bloomberg)Having already raised about $13 billion earlier this year, UBS may have to double dip in the guacamole. As it gets set to report another wave of writedowns, analysts say it will have to go back and raise more money, possibly as much as another $15 billion. Overnight, shares fell around 4 percent on the report.
Monday, March 31, 2008
Sunday, March 30, 2008
Will Euro Rise to 1.6000 Against Dollar This Week?
People calling for a rally of the US dollar again got disappointed as USD bears got aggressive with every piece of USD-negative economic data that came in. The Reuters/University of Michigan index of consumer sentiment fell to a 16-year low, and consumer spending rose 0.1% in February, the least in more than a year, after a 0.4% gain in January. Weakness in the greenback is most prominent against the Euro; EUR/USD gained the most in more than two years last week, rallying more than 500 pips, with most gains made over last Tuesday and Wednesday. If EUR/USD breaks above its all-time high of 1.5900, it could next target 1.5950, 1.5990-1.6000.
Contraction of US Economy?
An increasing number of economists are predicting a US recession as job, retail sales and manufacturing data have worsened this year. Theoretically, to qualify as a recession, the economy has to shrink for six straight months. Traders are pricing in a 52% chance the Fed will cut its target rate by a quarter-point to 2% at its meeting on April 30, and the remaining bets are for a half-point cut.
There will be many major economic releases this week, including US ISM manufacturing on Tuesday and US non-farm payrolls on Friday.
Contraction of US Economy?
An increasing number of economists are predicting a US recession as job, retail sales and manufacturing data have worsened this year. Theoretically, to qualify as a recession, the economy has to shrink for six straight months. Traders are pricing in a 52% chance the Fed will cut its target rate by a quarter-point to 2% at its meeting on April 30, and the remaining bets are for a half-point cut.
There will be many major economic releases this week, including US ISM manufacturing on Tuesday and US non-farm payrolls on Friday.
Saturday, March 29, 2008
Forget April Fools' Day: Next Week's Data is No Joke
Next Tuesday may be April Fools' Day, but the data due out during the week will be no joke--especially if it’s as bad as expected.There will be two key points for the week: Wednesday’s Congressional testimony by Federal Reserve Chairman Ben Bernanke before the Joint Economic Committee and the first labor report of the month released Friday. Both events are highly predictable.Bernanke’s testimony will likely echo the Fedspeak remarks we’ve heard in the two weeks since the Federal Open Market Committee’s March 18 meeting. This was the meeting at which the Fed further reduced the target Fed Funds rate (the interest rate banks charge each other for overnight loans used to maintain required reserves) to the lowest level since December 2004 -- when rates were on the way up.
The Federal Reserve hasn’t exactly been idling since then. It engineered the acquisition of threatened investment banking firm Bear Stearns by commercial banking giant JPMorgan Chase and then added new arrows to its quiver in its uphill struggle to contain damage in the financial services sector from the mortgage meltdown.Bernanke’s testimony comes against the backdrop of a new survey by the Pew Research Center, which found Americans have grown steadily more negative about the national economy over the past three months. According to the survey, only 11% of the public views the economy as "excellent" or "good," compared with 17% in early February, and 26% in January. The survey's results show people's view of the economy is at lows it saw during the recession of the early 1990s. "In August 1993, 10% of Americans rated the economy as excellent or good in a Gallup survey,” the survey found.However, Bernanke might be able to bask in anonymity. According to the survey, most Americans don't know who he is: 56% say they have not heard of him or do not know enough about him to offer an opinion. Those who are familiar enough with Bernanke to offer an opinion of him are divided: about a quarter (24%) hold a favorable, while 20% offer an unfavorable rating. Bernanke did somewhat better with those who know about recent investment bank problems. Among those who know a lot about the situation, 37% rated him favorably and 40% did not offer an opinion.If Bernanke slinks in under the radar, Friday’s employment report won’t. The headline numbers such as the unemployment rate and the change in payroll jobs will, by definition, draw the most attention -- but the report also contains nuggets suggesting the future direction of the economy.Joel Naroff, chief economist at Commerce Bank, suggested one nugget could come from the diffusion index in the employment report. The index, Naroff said, shows how broadly-based the changes in jobs are and reflects the breadth of employment. The index--on the last page of the report --is a series of tables noting the percentage of industries that have increased their payrolls in the last month, three months, six months and the last twelve months. Looking at the percentage changes at different time frames provides insight about trends in layoffs and hiring generally and, since there are two sets of indexes-- manufacturing and all private sector payrolls--how widespread the changes are.Another under-the-radar number, according to David Resler, chief economist at Nomura, is the labor force participation rate. Resler noted the unemployment rate improved in February even though job creation was negative for the second month in a row because the labor force--the sum of individuals employed and unemployed (only those actively looking for work are considered “unemployed”) -- declined.Confused by this? Here's a simple example. Imagine there were only 11 people over the age of 16 (which is the age cut-off used by the Bureau of Labor Statistics in developing its employment report). Of the 11, two are unemployed and nine are employed, producing an unemployment rate of 18%, or two divided by 11. As the labor market weakens, one of the two who had been unemployed stops looking, reducing the labor force to 10. The unemployment rate would be cut to 10%, or one divided by ten.The composition of the labor force too, Resler suggested, could offer glimpses into the future. He suggested the weakening labor market could push older workers into retirement, with the composition force changing.We’ll see Friday.
The Federal Reserve hasn’t exactly been idling since then. It engineered the acquisition of threatened investment banking firm Bear Stearns by commercial banking giant JPMorgan Chase and then added new arrows to its quiver in its uphill struggle to contain damage in the financial services sector from the mortgage meltdown.Bernanke’s testimony comes against the backdrop of a new survey by the Pew Research Center, which found Americans have grown steadily more negative about the national economy over the past three months. According to the survey, only 11% of the public views the economy as "excellent" or "good," compared with 17% in early February, and 26% in January. The survey's results show people's view of the economy is at lows it saw during the recession of the early 1990s. "In August 1993, 10% of Americans rated the economy as excellent or good in a Gallup survey,” the survey found.However, Bernanke might be able to bask in anonymity. According to the survey, most Americans don't know who he is: 56% say they have not heard of him or do not know enough about him to offer an opinion. Those who are familiar enough with Bernanke to offer an opinion of him are divided: about a quarter (24%) hold a favorable, while 20% offer an unfavorable rating. Bernanke did somewhat better with those who know about recent investment bank problems. Among those who know a lot about the situation, 37% rated him favorably and 40% did not offer an opinion.If Bernanke slinks in under the radar, Friday’s employment report won’t. The headline numbers such as the unemployment rate and the change in payroll jobs will, by definition, draw the most attention -- but the report also contains nuggets suggesting the future direction of the economy.Joel Naroff, chief economist at Commerce Bank, suggested one nugget could come from the diffusion index in the employment report. The index, Naroff said, shows how broadly-based the changes in jobs are and reflects the breadth of employment. The index--on the last page of the report --is a series of tables noting the percentage of industries that have increased their payrolls in the last month, three months, six months and the last twelve months. Looking at the percentage changes at different time frames provides insight about trends in layoffs and hiring generally and, since there are two sets of indexes-- manufacturing and all private sector payrolls--how widespread the changes are.Another under-the-radar number, according to David Resler, chief economist at Nomura, is the labor force participation rate. Resler noted the unemployment rate improved in February even though job creation was negative for the second month in a row because the labor force--the sum of individuals employed and unemployed (only those actively looking for work are considered “unemployed”) -- declined.Confused by this? Here's a simple example. Imagine there were only 11 people over the age of 16 (which is the age cut-off used by the Bureau of Labor Statistics in developing its employment report). Of the 11, two are unemployed and nine are employed, producing an unemployment rate of 18%, or two divided by 11. As the labor market weakens, one of the two who had been unemployed stops looking, reducing the labor force to 10. The unemployment rate would be cut to 10%, or one divided by ten.The composition of the labor force too, Resler suggested, could offer glimpses into the future. He suggested the weakening labor market could push older workers into retirement, with the composition force changing.We’ll see Friday.
Friday, March 28, 2008
Plosser Speaks Up Against Aggressive Rate Cut
The US dollar is getting some prop against major currencies on Friday. Federal Reserve Bank of Philadelphia President Charles Plosser said at a conference in Cape Town today the Fed’s 75 basis-point rate reduction this month was too much, and it risks losing its reputation of quelling inflation. Plosser said, “A less aggressive cut would have been more appropriate.” The Fed’s reputation for keeping inflation low and stable “can be lost if we do not continue to act in a way that is consistent with it,” he said. He also said, “We’ve done a lot to support economic growth. We need to pay attention to inflation.” Plosser is a well-known inflation hawk, and he, together with Dallas Fed President Richard Fisher, dissented the FOMC decision to cut the Fed’s main lending rate to 2.25% on March 18.
US Economic Data
The final version of the Reuters/University of Michigan consumer sentiment survey for March saw the overall index decrease to 69.5, as widely expected, from 70.8 in February. The preliminary March reading was 70.5. This was the lowest reading since 1992. Another report today shows US personal spending for February increased by 0.1% compared to the month before. January spending had gone up an unrevised 0.4%. Even though the data is better than the 0.1% drop expected, the performance in February was the weakest since a 0.1% dip in September 2006. Meanwhile, the PCE price index excluding food and energy, climbed 2% on an annual pace in February. Core inflation also rose 2% in January as well.
Forex Trading
Euro bulls are hesitant in pushing the Euro higher vs the US dollar before the weekend as rumors of European banks having huge writedowns are making rounds, and the currency pair trades between 1.5750-1.5850 most of the time. USD/CHF faces resistance around 1.0000.
US Economic Data
The final version of the Reuters/University of Michigan consumer sentiment survey for March saw the overall index decrease to 69.5, as widely expected, from 70.8 in February. The preliminary March reading was 70.5. This was the lowest reading since 1992. Another report today shows US personal spending for February increased by 0.1% compared to the month before. January spending had gone up an unrevised 0.4%. Even though the data is better than the 0.1% drop expected, the performance in February was the weakest since a 0.1% dip in September 2006. Meanwhile, the PCE price index excluding food and energy, climbed 2% on an annual pace in February. Core inflation also rose 2% in January as well.
Forex Trading
Euro bulls are hesitant in pushing the Euro higher vs the US dollar before the weekend as rumors of European banks having huge writedowns are making rounds, and the currency pair trades between 1.5750-1.5850 most of the time. USD/CHF faces resistance around 1.0000.
Opening Bell: 3.28.08
Judge says ex-Bear exec can't join Morgan Stanley (Reuters) A judge has ruled that an ex-Bear exec can't take up work at Morgan Stanley, because, argued Bear itself, the just-resigned executive hadn't given the proper 90 days notice. The 20-year old vet just quit Bear 10 days ago, so the question seemed to be: in times of extreme chaos and uncertainty, do the normal rules about this apply? Apparently in this guy's case, the answer was yes.
Citi Continues Leadership Overhaul (WSJ)New hire at Citi: Terri Dial, who currently runs Lloyd's retail banking unit in the UK, is expected to be brought on the consumer business under Vikram Pandit. More broadly, the company is expected to break down lines on a more regional basis, allowing its operations to be more in tune with the local culture and business climate.
Neeleman to leave JetBlue for Brazilian start-up? (Today in the Sky)For some reason, this rumor is getting reignited, even though it's old: jetBlue founder and erstwhile CEO Jeff Neeleman may go to Brazil and start a new airline there. Presumably something like the jetBlue of Brazil. So far there's nothing official, though apparently he is discussing his future as chairman of jetBlue -- obviously if he jetted down to Brazil to launch a new airline, he probably wouldn't have time to attend many board meetings. Anyway, we're all for it. We've heard the civil aviation sector in Brazil could use some improvement...
Is China Really No. 1 in Internet Users? (The Numbers Guy)Maybe not. Carl Bialik, as he's prone to do, is able to poke a few holes in the side of the can, so that some light can get through. Some issues: the US survey only surveyed people with landline, which, given the demographics and all has to be skewing. Then there are people who have internet access, but who haven't used it in the last month (though really, that can't account for two many people). And then there's the fact that stats out of China can only be relied on so much -- sort of like stats for health and literacy out of Cuba. You're going to believe those?
Weber Says ECB Will Raise Interest Rates `If Needed' (Bloomberg)Those stalwart inflation fighters at the ECB won't be changing their tune any time soon. With most of the world still preoccupied about liquidity and cash availability and stuff like that, an ECB member is still warning that rate increases could be coming if inflation looks like it's becoming an issue. Yeah, they really believe int his price stability thing.
Citi Continues Leadership Overhaul (WSJ)New hire at Citi: Terri Dial, who currently runs Lloyd's retail banking unit in the UK, is expected to be brought on the consumer business under Vikram Pandit. More broadly, the company is expected to break down lines on a more regional basis, allowing its operations to be more in tune with the local culture and business climate.
Neeleman to leave JetBlue for Brazilian start-up? (Today in the Sky)For some reason, this rumor is getting reignited, even though it's old: jetBlue founder and erstwhile CEO Jeff Neeleman may go to Brazil and start a new airline there. Presumably something like the jetBlue of Brazil. So far there's nothing official, though apparently he is discussing his future as chairman of jetBlue -- obviously if he jetted down to Brazil to launch a new airline, he probably wouldn't have time to attend many board meetings. Anyway, we're all for it. We've heard the civil aviation sector in Brazil could use some improvement...
Is China Really No. 1 in Internet Users? (The Numbers Guy)Maybe not. Carl Bialik, as he's prone to do, is able to poke a few holes in the side of the can, so that some light can get through. Some issues: the US survey only surveyed people with landline, which, given the demographics and all has to be skewing. Then there are people who have internet access, but who haven't used it in the last month (though really, that can't account for two many people). And then there's the fact that stats out of China can only be relied on so much -- sort of like stats for health and literacy out of Cuba. You're going to believe those?
Weber Says ECB Will Raise Interest Rates `If Needed' (Bloomberg)Those stalwart inflation fighters at the ECB won't be changing their tune any time soon. With most of the world still preoccupied about liquidity and cash availability and stuff like that, an ECB member is still warning that rate increases could be coming if inflation looks like it's becoming an issue. Yeah, they really believe int his price stability thing.
Thursday, March 27, 2008
Whitney Sends Bank Stocks Tumbling
It seems that one of the most influential analysts in the current market conditions is Meredith Whitney from Oppenheimer. Yesterday she slashed her estimates for Citigroup (C: 21.79 -0.26 -1.18%) saying it could suffer write-downs totaling $13.2 billion, sending its stocks down, and today she sent Merrill Lynch (MER: 41.90 -2.52 -5.67%) and UBS (UBS: 29.13 -0.03 -0.10%) stocks plunging by saying that they could suffer a loss this quarter and have massive write-downs of $6 billion and $11.1 billion, respectively.
The fact that oil prices have risen above $107 a barrel and the lower-than-expected results from Oracle (ORCL: 19.43 -1.51 -7.21%) haven’t given the stock markets much cheer either. In these market conditions, it seems an analyst’s best bet is to look at worst-case scenarios as many of those are coming true. All of this will be great news for those who, like Jim Rogers, were short financials and long commodities.
On a different note, the Clear Channel deal may not be dead after all. Clear Channel Communications (CCU: 29.60 +2.68 +9.96%), the US radio operator, said on Thursday it had won a ruling from a Texas judge that may advance its efforts to force banks to finance a $20 billion buyout by private equity firms Bain Capital Partners and Thomas H Lee Partners who filed the lawsuit. A group of six banks, led by Citigroup was supposed lend more than $22 billion for the buyout, but apparently backed out after credit conditions worsened. Clear Channel shares rose today, erasing its part of its loss of 17.5% on Wednesday.
The fact that oil prices have risen above $107 a barrel and the lower-than-expected results from Oracle (ORCL: 19.43 -1.51 -7.21%) haven’t given the stock markets much cheer either. In these market conditions, it seems an analyst’s best bet is to look at worst-case scenarios as many of those are coming true. All of this will be great news for those who, like Jim Rogers, were short financials and long commodities.
On a different note, the Clear Channel deal may not be dead after all. Clear Channel Communications (CCU: 29.60 +2.68 +9.96%), the US radio operator, said on Thursday it had won a ruling from a Texas judge that may advance its efforts to force banks to finance a $20 billion buyout by private equity firms Bain Capital Partners and Thomas H Lee Partners who filed the lawsuit. A group of six banks, led by Citigroup was supposed lend more than $22 billion for the buyout, but apparently backed out after credit conditions worsened. Clear Channel shares rose today, erasing its part of its loss of 17.5% on Wednesday.
Opening Bell: 3.27.08
A Decade Later, John Meriwether Must Scramble Again (WSJ) The recent struggles at John Meriwether's (ex-LTCM) have been documented elsewhere, though the WSJ brings everything up to speed. His big bond portfolio is down a cool 28 percent this year, though more significantly they're dealing with a potential wave of redemptions that they're trying to stem. There's a lesson here. It's not that Meriwether is a bad money manager. And it's not that he's unlucky. Again, same. It comes back to the old, old cliche: that you're better off losing a ton of money in one of the biggest high profile fund collapses of all time then in just a moderately bad one. Cause any fool can lose $100 million of OPM.
Prudent Bear's Approach Delivers Payoff (WSJ)Amazing interview with David Tice, the longtime manager of the short-oriented 'Prudent Bear' fund, which has been doing well of late. Tice has been a bear for a long, long, long time. Well before anyone coined the term .com bubble. If you ever catch him on CNBC, he just looks like a bear. Very dour. Anyway, the interview: first amazing part is that he apparently went on a date recently (of course he's not married) and when he described his macro view to his date, the date was ruined: "You can almost feel the energy go from the room." Awesome. Imagine going on a date with the guy would probably be as fun as going on a date with Ralph Nader. The second best part: where he says down at the end that he really wants to get bullish again. Yeah. Right. No. Way. The dude likes being the negative guy. The contrarian who talks about bubbles everywhere as far as the eye can see. I'll be shocked if we live to see the day he turns positive.
GE and Santander Reach Preliminary AgreementA little spit swapping from GE and Banco Santander, based in Spain. The latter will acquire GE Money businesses in Germany, Finland and Austria and Its Card and Auto Financing Businesses in the UK. The former will acquire Interbanca, which Santandar got through acquiring ABN. The transactions are valued around 1 billion EUR.
Clear Channel Communications Comments on Temporary Restraining Order Granted in Merger Case by Texas JudgeClear Channel said in a press release this morning that a Texas judge has granted a "temporary restraining order" against the banks, who are looking to walk away from their funding commitments. No, the banks aren't stalking, they just want to save a few billion. From the announcement: "We are pleased that the Banks and the Purchasers will now be able to move quickly to complete the loan documents and fund the Merger." Somehow we doubt it will move that quickly.
Prudent Bear's Approach Delivers Payoff (WSJ)Amazing interview with David Tice, the longtime manager of the short-oriented 'Prudent Bear' fund, which has been doing well of late. Tice has been a bear for a long, long, long time. Well before anyone coined the term .com bubble. If you ever catch him on CNBC, he just looks like a bear. Very dour. Anyway, the interview: first amazing part is that he apparently went on a date recently (of course he's not married) and when he described his macro view to his date, the date was ruined: "You can almost feel the energy go from the room." Awesome. Imagine going on a date with the guy would probably be as fun as going on a date with Ralph Nader. The second best part: where he says down at the end that he really wants to get bullish again. Yeah. Right. No. Way. The dude likes being the negative guy. The contrarian who talks about bubbles everywhere as far as the eye can see. I'll be shocked if we live to see the day he turns positive.
GE and Santander Reach Preliminary AgreementA little spit swapping from GE and Banco Santander, based in Spain. The latter will acquire GE Money businesses in Germany, Finland and Austria and Its Card and Auto Financing Businesses in the UK. The former will acquire Interbanca, which Santandar got through acquiring ABN. The transactions are valued around 1 billion EUR.
Clear Channel Communications Comments on Temporary Restraining Order Granted in Merger Case by Texas JudgeClear Channel said in a press release this morning that a Texas judge has granted a "temporary restraining order" against the banks, who are looking to walk away from their funding commitments. No, the banks aren't stalking, they just want to save a few billion. From the announcement: "We are pleased that the Banks and the Purchasers will now be able to move quickly to complete the loan documents and fund the Merger." Somehow we doubt it will move that quickly.
Wednesday, March 26, 2008
Dow Falls On Citigroup’s Profit Outlook
After four trading days of rally, the Dow Jones Industrial Average (^DJI: 12449.08 -83.52 -0.67%) fell for the first time, weighed down by the decline in financial stocks, which are retreating by the biggest amount in nearly two weeks. Citigroup (C: 22.11 -1.31 -5.59%), the largest US bank, slumped the most in the Dow after Oppenheimer & Co.’s Meredith Whitney said its quarterly loss will be four times bigger than previously forecast. She cut her full-year estimate to a loss of 15 cents a share from profit of 75 cents to reflect potential first-quarter writedowns on leveraged loans and collateralized debt obligations of $13.1 billion. She said in a report dated yesterday that in the first quarter, the bank may lose $1.15 a share, compared with an initial loss estimate of 28 cents.
Dow has fallen more than 110 points so far in Wednesday’s trading. Stocks are also suffering from the unexpected 1.7% drop in US durable goods orders for February, which measure demand for products made to last at least three years. This followed a 4.7% decrease in January. It was also reported today that sales of new homes dropped 1.8% last month to a 13-year low.
Motorola (MOT: 10.06 +0.30 +3.07%), the biggest US maker of mobile phones, climbed today after announcing plans to split into two publicly traded companies. One company will focus on handsets and the other will sell broadband networking devices. Before today, Motorola stock had fallen 56% in the past two years as customers hankered after phones from Apple (AAPL: 144.92 +3.94 +2.79%) and Nokia (NOK: 31.44 -0.15 -0.47%). Although Motorola was well-known for coming up with its Razr, which started the category of slim phones when it was introduced in 2004, it lost market share in phones last year after failing to come up with a hit successor following Razr.
Clear Channel Communications (CCU: 27.18 -5.38 -16.52%) posted its steepest drop since July 2002 on concern banks will pull loans for the broadcaster’s $19.5 billion takeover. Lehman Brothers (LEH: 42.86 -2.35 -5.20%) slashed its price estimate on the stock by 36% to $25.
Dow has fallen more than 110 points so far in Wednesday’s trading. Stocks are also suffering from the unexpected 1.7% drop in US durable goods orders for February, which measure demand for products made to last at least three years. This followed a 4.7% decrease in January. It was also reported today that sales of new homes dropped 1.8% last month to a 13-year low.
Motorola (MOT: 10.06 +0.30 +3.07%), the biggest US maker of mobile phones, climbed today after announcing plans to split into two publicly traded companies. One company will focus on handsets and the other will sell broadband networking devices. Before today, Motorola stock had fallen 56% in the past two years as customers hankered after phones from Apple (AAPL: 144.92 +3.94 +2.79%) and Nokia (NOK: 31.44 -0.15 -0.47%). Although Motorola was well-known for coming up with its Razr, which started the category of slim phones when it was introduced in 2004, it lost market share in phones last year after failing to come up with a hit successor following Razr.
Clear Channel Communications (CCU: 27.18 -5.38 -16.52%) posted its steepest drop since July 2002 on concern banks will pull loans for the broadcaster’s $19.5 billion takeover. Lehman Brothers (LEH: 42.86 -2.35 -5.20%) slashed its price estimate on the stock by 36% to $25.
Tuesday, March 25, 2008
Euro
The euro appreciated sharply vs the U.S. dollar today as the single currency tested offers around the US$ 1.5600 figure and was supported around the $1.5405 level. Traders lifted the common currency higher as risk appetite returned to the market. Very weak economic data were released in the U.S. today that saw March consumer confidence print at 64.5, down from 76.4 in February – the weakest print in more than five years. Similarly, the expectations and present situation sub-indices fell sharply. Also, it was reported that the Standard & Poors/ Case-Shiller house price index fell 11.4% in January, its largest drop since at least 1987. Goldman Sachs today estimated that U.S. financial institutions are likely to assume about US$ 460 billion in credit losses after loan loss provisions are made but estimates that banks have only made provisions for about US$ 120 billion thus far. In eurozone news, traders await the release of tomorrow’s German Ifo business sentiment survey. Traders may reshape their expectations regarding the European Central Bank’s likely course of monetary policy if tomorrow’s print is weak. The ECB today allocated an additional €50 billion in its regular weekly refinancing operation, meaning he central bank allocated €216 billion in seven-day funds at 4.23% or higher. The massive liquidity provision didn’t have a major impact on short-term lending rates, and this may be one factor that prompts the ECB to expand monetary policy despite uncomfortably high inflation. Euro bids are cited around the US$ 1.5145 level.
Opening Bell: 3.25.08
HBOS Climbs After Executives Buy Shares in U.K. Bank (Bloomberg) We love insider buys. They're so... confidence inducing. Executive at HBOS, said to have come under a big bear raid in recent days, are buying. CEO Andy Hornby took advantage of the "false rumors" on HBOS shares to acquire another 1.4 million of them. And that's already paid of handsomely. The stock spiked 17 percent on the news.
Bear at $10: Done Deal? (WSJ)No, really, $10 is it. Of course if shareholders don't sue in Delaware court for more, then there's no doubt. $10 is it. This is your last and final offer? Are you buying shares above $10? Think you can do the same thing you did last time? Fat chance. They're gonna take a 39.5 percent stake. They're going to take you're building, and then what are you going to have? Of course, if a Delaware court did strike down the deal, we'd be looking at one of the most explosive Federalist issues of all time -- a Delaware court defying the will of the Fed. Would the Fed send in the national guard to overpower the court and manually put Bear's assets into JPM's account?
Regional Indexes Surge On Wall Street's Gains (WSJ)The positive-reinforcing cycle continued while you were sleeping, as the Asian markets moved sharply higher across the board. Hong Kong turnedin a monster, gaining 6.4 percent, a bit ahead of India. The Nikkei was a relative laggard, gaining only 2.12 percent.
U.S. and Canada Accuse Drug Maker of Fraud (NYT)For those of you not following the Biovail story, you're really missing out. Like, really. Just to make sure you know the story of the truck: the company blamed an earnings shortfall a while back on a truck crash carrying its pills. Turns out that was a lie. An analyst actually did the work himself, confirming that there was no product in the truck. The saga goes from there, but that analyst is a hero.
Bear at $10: Done Deal? (WSJ)No, really, $10 is it. Of course if shareholders don't sue in Delaware court for more, then there's no doubt. $10 is it. This is your last and final offer? Are you buying shares above $10? Think you can do the same thing you did last time? Fat chance. They're gonna take a 39.5 percent stake. They're going to take you're building, and then what are you going to have? Of course, if a Delaware court did strike down the deal, we'd be looking at one of the most explosive Federalist issues of all time -- a Delaware court defying the will of the Fed. Would the Fed send in the national guard to overpower the court and manually put Bear's assets into JPM's account?
Regional Indexes Surge On Wall Street's Gains (WSJ)The positive-reinforcing cycle continued while you were sleeping, as the Asian markets moved sharply higher across the board. Hong Kong turnedin a monster, gaining 6.4 percent, a bit ahead of India. The Nikkei was a relative laggard, gaining only 2.12 percent.
U.S. and Canada Accuse Drug Maker of Fraud (NYT)For those of you not following the Biovail story, you're really missing out. Like, really. Just to make sure you know the story of the truck: the company blamed an earnings shortfall a while back on a truck crash carrying its pills. Turns out that was a lie. An analyst actually did the work himself, confirming that there was no product in the truck. The saga goes from there, but that analyst is a hero.
Monday, March 24, 2008
Stocks Rally On JPMorgan’s Revised Offer For Bear Stearns
Financial stocks are given a further boost Monday after JPMorgan (JPM: 47.00 +1.03 +2.24%) announced it is increasing its bid for Bear Stearns (BSC: 12.06 +6.0999 +102.35%) to $10 a share, from the initial $2 per share offer, in a move to placate unhappy shareholders who weren’t at all satisfied to see Bear Stearns taken over at such a huge discount (a 93% discount to be exact). JPMorgan will also purchase 95 million new Bear Stearns shares, representing 39.5% of Bear’s outstanding common stock. JPMorgan is buying the shares at the same price as its takeover offer and the deal is expected to be done by April 8. The new takeover bid and share purchase agreement have been given the stamp of approval by the boards of both companies. Bear Stearns and JPMorgan stocks shot up on the news. Even last week, Bear rose steadily last week above $2 as investors thought the stock was hugely underpriced.
The Standard & Poor’s 500 Index (^GSPC: 1356.73 +27.22 +2.05%) rose to the highest this month while the Dow Jones Industrial Average (^DJI: 12586.90 +225.58 +1.82%) climbed more than 200 points in Monday trading.
For those of you who buy bling from Tiffany & Co. (TIF: 43.03 +4.43 +11.48%), you have contributed to the bottomline of the second-largest luxury jewelry retailer. Tiffany stocks gained the most in more than six years on better-than-forecast earnings, on increased sales overseas and at new stores. Net income fell 16% to $118.3 million, or 89 cents a share, in the fourth quarter ended on Jan 31 from $140.5 million, or $1.02 a share, a year earlier. But excluding special items, earnings were $1.27 a share, 6 cents higher than analysts’ average forecast.
Monsanto Co. (MON: 104.69 +7.56 +7.78%), the biggest seed producer, posted its steepest advance since 2001 after UBS AG advised buying the shares.
The Standard & Poor’s 500 Index (^GSPC: 1356.73 +27.22 +2.05%) rose to the highest this month while the Dow Jones Industrial Average (^DJI: 12586.90 +225.58 +1.82%) climbed more than 200 points in Monday trading.
For those of you who buy bling from Tiffany & Co. (TIF: 43.03 +4.43 +11.48%), you have contributed to the bottomline of the second-largest luxury jewelry retailer. Tiffany stocks gained the most in more than six years on better-than-forecast earnings, on increased sales overseas and at new stores. Net income fell 16% to $118.3 million, or 89 cents a share, in the fourth quarter ended on Jan 31 from $140.5 million, or $1.02 a share, a year earlier. But excluding special items, earnings were $1.27 a share, 6 cents higher than analysts’ average forecast.
Monsanto Co. (MON: 104.69 +7.56 +7.78%), the biggest seed producer, posted its steepest advance since 2001 after UBS AG advised buying the shares.
Meltdown! The Book
The exclamation mark is ours - but surely merited. Deal Journal reports that the race is on to get out the first narrative of Bear Stearns demise even as the final chapter of the saga remains in flux.
Publisher Doubleday has apparently already signed up William Cohan, whose look at Lazards, “The Last Tycoons”, won the FT/Goldman Sachs business book of the year in 2007, to pen the next financial epic.
Editor-in-chief Bill Thomas was on the phone last Friday apparently, entreating Cohan to put the saga into prose, before JPMorgan added the next twist to Bear’s demise.
Mr. Cohan subsequently wrote a proposal over the weekend for a financial narrative that will place Bear Stearns at its hub. After speaking to Mr. Cohan’s agent, Joy Harris, Mr. Thomas struck a deal on Tuesday. The book, tentatively titled “Meltdown,” is expected to be published in spring 2009. “He will tell the story of the financial crisis in all its manifest glory through a narrative whose center is Bear Stearns,” said Mr. Thomas.
Other would-be chroniclers of the credit crisis and Bear blow-up should get typing pronto.
But Mr Cohan probably needs a fresher title. Martin Baker, the other half of fund manager Nicola Horlick, already has a “fast-moving suspense novel…set in the world of high finance” with the same name.
Apparently, this is the first of a trilogy featuring academic-cum-sleuth, Samuel Spendlove:
Meltdown is a story of quest, love and moral retrospection. Sent by a powerful media baron to unearth the truth about the suspected market manipulation of the shares in a publishing company, Samuel Spendlove stumbles upon a far bigger, infinitely more dangerous plot to bring down the world’s financial markets.
Publisher Doubleday has apparently already signed up William Cohan, whose look at Lazards, “The Last Tycoons”, won the FT/Goldman Sachs business book of the year in 2007, to pen the next financial epic.
Editor-in-chief Bill Thomas was on the phone last Friday apparently, entreating Cohan to put the saga into prose, before JPMorgan added the next twist to Bear’s demise.
Mr. Cohan subsequently wrote a proposal over the weekend for a financial narrative that will place Bear Stearns at its hub. After speaking to Mr. Cohan’s agent, Joy Harris, Mr. Thomas struck a deal on Tuesday. The book, tentatively titled “Meltdown,” is expected to be published in spring 2009. “He will tell the story of the financial crisis in all its manifest glory through a narrative whose center is Bear Stearns,” said Mr. Thomas.
Other would-be chroniclers of the credit crisis and Bear blow-up should get typing pronto.
But Mr Cohan probably needs a fresher title. Martin Baker, the other half of fund manager Nicola Horlick, already has a “fast-moving suspense novel…set in the world of high finance” with the same name.
Apparently, this is the first of a trilogy featuring academic-cum-sleuth, Samuel Spendlove:
Meltdown is a story of quest, love and moral retrospection. Sent by a powerful media baron to unearth the truth about the suspected market manipulation of the shares in a publishing company, Samuel Spendlove stumbles upon a far bigger, infinitely more dangerous plot to bring down the world’s financial markets.
Opening Bell: 3.24.08
JPMorgan in Negotiations to Raise Bear Stearns Bid (NYT) The speculators may get paid off: JPM is said to be considering a quintupling of its original bid for Bear Stearns, meaning it would pay $10/share, rather than the original $2. Despite all this talk about folks sopping up the stock at any price just so they could vote for the $2 offer, the move is seen as helping JPM win over shareholder holdouts. According to the report, it's the Fed that's hesitant to see the renegotiations, partly because it doesn't want to have seen as engineering a bailout of Bear shareholders.. If the two sides do agree on the $10 price, Bear may invoke a rule, legal under Delaware law, allowing JPM to buy up to 39.5 percent of the company without shareholder approval. Caveat investor: the talks could still collapse at any moment.
Friday, March 21, 2008
S&P Cuts Credit-Rating Outlook of Goldman and Lehman
On Friday, Goldman Sachs (GS: 179.63 +13.14 +7.89%) and Lehman Brothers (LEH: 48.65 +6.42 +15.20%) had their credit-rating outlook cut to negative by Standard & Poor’s, which said Wall Street banks’ profits may decline as much as 30% this year. S&P said in a statement that their current expectation is that net revenue could decline between 20 and 30% year-on-year for independent securities firms. However, S&P affirmed its long-term credit ratings for Goldman and Lehman. S&P said that even though the Fed’s financing for JPMorgan (JPM: 45.97 +3.50 +8.24%)’s takeover of Bear Stearns (BSC: 5.9601 +0.6302 +11.82%) “mitigates liquidity concerns”, they still “see some possibility, were there to be persisting capital markets turmoil and sharply weakening economic conditions, that financial performance could deteriorate significantly”.
Credit Suisse (CS: 49.48 -0.37 -0.74%), Switzerland’s second-largest bank, said it will write down $2.65 billion after a “small number” of its traders deliberately mispriced residential mortgage-backed bonds. Credit Suisse also said it’s unlikely to generate a profit this quarter.
Credit Suisse (CS: 49.48 -0.37 -0.74%), Switzerland’s second-largest bank, said it will write down $2.65 billion after a “small number” of its traders deliberately mispriced residential mortgage-backed bonds. Credit Suisse also said it’s unlikely to generate a profit this quarter.
Thursday, March 20, 2008
Citigroup Plans to Cut More Than 5% of Securities Employees
Citigroup Inc., the biggest U.S. bank by assets, plans to cut more than 5 percent of staff in the securities unit to rein back expenses after U.S. subprime- mortgage related losses.
Citigroup plans to fire 2,000 investment bankers and traders by the end of the month, the New York Times reported earlier today, citing unidentified people close to the situation.
The New York-based company said in January it is cutting about 4,200 jobs and curbing year-end bonuses for top executives after $18.1 billion in writedowns on subprime home loans and bonds led to a fourth-quarter loss. It employs 360,000 people globally.
Citigroup plans to fire 2,000 investment bankers and traders by the end of the month, the New York Times reported earlier today, citing unidentified people close to the situation.
The New York-based company said in January it is cutting about 4,200 jobs and curbing year-end bonuses for top executives after $18.1 billion in writedowns on subprime home loans and bonds led to a fourth-quarter loss. It employs 360,000 people globally.
US Dollar Rebounds On US Stock Rally
Traders continue to pare their short USD positions against major currencies like the Euro, Swiss franc, Japanese yen and the British pound. Although interest rate differentials do not favor the US dollar in the medium- to long-term, the currency has managed to recover on the back of a strong rally in US stocks after the Fed cut the benchmark rate from 3% to 2.25% and signaled it won’t hesitate to cut rates further should the situation arise. The greenback also got some support after better-than-forecast earnings from Morgan Stanley and as regulators for Fannie Mae and Freddie Mac eased capital requirements to allow them to buy more loans.
Thornburg Seeks $1 Billion to Avert Bankruptcy Risk
Thornburg Mortgage Inc (TMA.N: Quote, Profile, Research), a struggling "jumbo" home loan provider, said on Wednesday it would try to quickly raise nearly $1 billion of capital to keep five lenders at bay and avert a possible bankruptcy filing.
Shares plunged because the plan to sell $1 billion of convertible debt and give lenders a 27 percent stake in the company would significantly dilute existing shareholders' stakes. Thornburg shares closed down $1.48, or 49 percent, at $1.50.
The Santa Fe, New Mexico-based company had previously said its survival was in question after being unable to meet lender demands for more than $600 million of cash or collateral.
Shares plunged because the plan to sell $1 billion of convertible debt and give lenders a 27 percent stake in the company would significantly dilute existing shareholders' stakes. Thornburg shares closed down $1.48, or 49 percent, at $1.50.
The Santa Fe, New Mexico-based company had previously said its survival was in question after being unable to meet lender demands for more than $600 million of cash or collateral.
Meriwether Bond Fund Falls 28%
John Meriwether's Relative Value Opportunity bond fund is down 28% this year, according to a person familiar with the matter. The fund had about $1.4 billion before its drop began ...
Wednesday, March 19, 2008
Visa's IPO Price: $44 a Share
Visa Inc. priced shares for its initial public offering of stock at $44, above the expected price of $37 to $42, according to J.P. Morgan Chase & Co., one of the lead underwriters.
The credit-card giant plans to sell 406 million shares in what -- at $17.86 billion -- will be the largest IPO in U.S. history. Visa's stock is expected to debut today on the New York Stock Exchange under the symbol V.
If it floats its share overallotment of 40.6 million shares, the IPO could raise as much at $19.65 billion, well ahead of the $10.62 billion raised ...
The credit-card giant plans to sell 406 million shares in what -- at $17.86 billion -- will be the largest IPO in U.S. history. Visa's stock is expected to debut today on the New York Stock Exchange under the symbol V.
If it floats its share overallotment of 40.6 million shares, the IPO could raise as much at $19.65 billion, well ahead of the $10.62 billion raised ...
Morgan Stanley Earnings Drop 42%, Less Than Analysts Estimated
Morgan Stanley, which reported the first loss in its history three months ago, said earnings fell 42 percent, less than analysts estimated, as investment banking fees dwindled and loan values declined.
Sony Ericsson predicts sales slide
Sony Ericsson, the world’s fourth largest mobile phone maker, warned that slower growth in its European markets would hit its first quarter sales, though its gross margin would remain the same on the year ago level.
Net income before tax at the joint venture, owned by Sweden’s Ericsson and Sony of Japan, is set to be €150m ($237.2m) to €200m, while net sales would fall from a year ago level, it said on Wednesday.
”Slowing market growth of mid-to-high end phones in markets where Sony Ericsson has a strong presence is affecting sales,” the firm said, adding the effect was visible mostly in Europe.
”In addition, certain component shortages for popular mid-priced phones have contributed to modest unit sales growth in the first quarter.”
Last week chip maker Texas Instruments cut its first quarter forecasts, citing weaker demand for chips used in higher priced 3G phones, and hitting mobile industry stocks in Europe as investors fear a weakening global economy is biting into consumers’ appetite for pricier phones.
Sony Ericsson President Dick Komiyama said that the market was ”proving to be challenging”.
Net income before tax at the joint venture, owned by Sweden’s Ericsson and Sony of Japan, is set to be €150m ($237.2m) to €200m, while net sales would fall from a year ago level, it said on Wednesday.
”Slowing market growth of mid-to-high end phones in markets where Sony Ericsson has a strong presence is affecting sales,” the firm said, adding the effect was visible mostly in Europe.
”In addition, certain component shortages for popular mid-priced phones have contributed to modest unit sales growth in the first quarter.”
Last week chip maker Texas Instruments cut its first quarter forecasts, citing weaker demand for chips used in higher priced 3G phones, and hitting mobile industry stocks in Europe as investors fear a weakening global economy is biting into consumers’ appetite for pricier phones.
Sony Ericsson President Dick Komiyama said that the market was ”proving to be challenging”.
Tuesday, March 18, 2008
Was Bear Stearns stock manipulated into a tailspin?
With all of those options that traded last week in Bear Stearns, many have been wondering if the firm was helped into the abyss. Apparently, now the SEC may be wondering the same thing:
U.S. regulators are investigating whether traders illegally sought to force Bear Stearns Cos. shares into a tailspin last week by spreading false information about the firm's finances, two people familiar with the inquiry said.
The Securities and Exchange Commission probe is focusing on whether hedge funds or other investors bet on a drop in the company's shares while disseminating rumors that the New York- based company was nearing collapse, said the people, who declined to be identified because the inquiry isn't public. The New York Stock Exchange's regulatory arm is also involved in the investigation, the people said.
U.S. regulators are investigating whether traders illegally sought to force Bear Stearns Cos. shares into a tailspin last week by spreading false information about the firm's finances, two people familiar with the inquiry said.
The Securities and Exchange Commission probe is focusing on whether hedge funds or other investors bet on a drop in the company's shares while disseminating rumors that the New York- based company was nearing collapse, said the people, who declined to be identified because the inquiry isn't public. The New York Stock Exchange's regulatory arm is also involved in the investigation, the people said.
Fed Cuts Benchmark Rate By 75 bps to 2.25%
The Fed has cut the main benchmark rate by 75 basis points from 3% to 2.25%, less than the 100 bp cut speculated by the financial markets. The vote wasn’t unanimous; there were two dissents for a smaller ease, coming from Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser, who preferred “less aggressive action”. The Fed’s statement that it “will act in a timely manner as needed to promote sustainable economic growth and price stability” signals that the Fed stands ready to cut interest rates again. The FOMC statement states that the outlook for the US economy has weakened further, with similar worries about credit tightening, housing and labor as in the prior statement. The FOMC notes inflation has been elevated, with some indications of inflation expectations rising, though the committee still expects inflation to moderate in the coming quarters. The Fed also voted to lower the discount rate, the cost of direct loans from the central bank, to 2.5%.
“Recent information indicates that the outlook for economic activity has weakened further,” the Fed said. “Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.”
The US dollar slipped against the Japanese yen following the rate cut.
“Recent information indicates that the outlook for economic activity has weakened further,” the Fed said. “Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.”
The US dollar slipped against the Japanese yen following the rate cut.
Goldman Replaces Cohen as Forecaster
Abby Joseph Cohen, one of the most prominent voices of the bull market during the 1990s, has been replaced as Goldman Sachs Group Inc.'s main forecaster of short-term market moves.
In her own forecast, issued in December, Ms. Cohen had called for the S&P 500 to finish at 1675 this year.
In her own forecast, issued in December, Ms. Cohen had called for the S&P 500 to finish at 1675 this year.
CME To Buy Nymex For $9.4 Billion
Providing a bright spot in what is already shaping up to be another grim week, the Chicago Mercantile Exchange agreed to buy the world’s top oil market for nearly 40 times what JPMorgan is paying for Bear Stearns (just in case you were wondering). But will nettlesome regulators, not to mention disgruntled Nymex shareholders, stand in the way of this transaction?
FOMC meeting
The market is expecting the FOMC at its meeting today to cut the funds rate by at least 100 bp to 2.00%. The market is discounting about a 20% chance for a 125 bp rate cut to 1.75%. The market is currently expecting an overall 150 bp rate cut to 1.50% by July.
MF Global
According to Reuters, MF Global addressed some of the market rumors surrounding the plunge of their stock price. The company says that it has enough funds on hand and access to additional funds to carry on normal business....
MF Global Ltd., the largest broker of exchange-traded futures and options, fell as much as 80 percent in New York trading on speculation clients are pulling money and as financial shares dropped to their lowest level in almost five years.
MF Global Ltd., the largest broker of exchange-traded futures and options, fell as much as 80 percent in New York trading on speculation clients are pulling money and as financial shares dropped to their lowest level in almost five years.
Monday, March 17, 2008
Things You Can Buy For $2 (Other Than Bear)
2 limes
1 organic avacado
15% of a drink at a bar
A pound (sterling)
A day’s worth of labor from a farmer in the Indian countryside
Nothing at a strip club
A payoff of that persistent newspaper boy who wants his $2
2.3 cheeseburgers from McDonald’s
Medicine for an African child for a whole month
Oh yeah, and these guys…Amazing Bear Stearns (NYSE: BSC) Fact: Their building is worth 3x more than what their equity was sold for.
1 organic avacado
15% of a drink at a bar
A pound (sterling)
A day’s worth of labor from a farmer in the Indian countryside
Nothing at a strip club
A payoff of that persistent newspaper boy who wants his $2
2.3 cheeseburgers from McDonald’s
Medicine for an African child for a whole month
Oh yeah, and these guys…Amazing Bear Stearns (NYSE: BSC) Fact: Their building is worth 3x more than what their equity was sold for.
Bear Stearns Is Now Worth $2 Per Share
Bear stearns should have filed for bankruptcy..they’ve got a beautiful building which should be worth more than $236 million!
Tragic for such a respected company
Will Lehman Brothers be the next to fail, then Washington Mutual?
Tragic for such a respected company
Will Lehman Brothers be the next to fail, then Washington Mutual?
Sunday, March 16, 2008
JP Morgan Offering $15-$20 A Share for Bear Stearns
JP Morgan Chase is offering to buy troubled investment bank Bear Stearns for between $15 and $20 a share, CNBC has learned.
Bear's board is currently meeting to discuss the proposal, which based on Bear's 118 million shares outstanding, would be valued at between $1.8 billion and $2.4 billion.
A deal in principle could be announced Sunday night, although the agreement would still need shareholder approval.
Here's what makes this a tricky situation: without shareholder approval, there is no real deal, so other banks and clients may be reluctant to deal with Bear on Monday unless it's part of a well capitalized JP Morgan.
Because of this, most executives inside Bear believe the Federal Reserve and Treasury will play some role in making sure there is a backstop if the shareholder approval isnt reached.
Of course, the deal itself could fall apart at the last minute, which would mean Bear would have to find another buyer, possibly JC Flowers.
An offer of $20 or less would be well below Bear's closing stock price of $30.85 on Friday, which was already down 47% for the day. As one senior Bear executive--who like most of the senior team is paid and continues to hold Bear stock--puts it: "based on the information i'm getting, lets just say I wont be retiring early."A JP Morgan spokeswoman could not be reached for comment.
Bear's board is currently meeting to discuss the proposal, which based on Bear's 118 million shares outstanding, would be valued at between $1.8 billion and $2.4 billion.
A deal in principle could be announced Sunday night, although the agreement would still need shareholder approval.
Here's what makes this a tricky situation: without shareholder approval, there is no real deal, so other banks and clients may be reluctant to deal with Bear on Monday unless it's part of a well capitalized JP Morgan.
Because of this, most executives inside Bear believe the Federal Reserve and Treasury will play some role in making sure there is a backstop if the shareholder approval isnt reached.
Of course, the deal itself could fall apart at the last minute, which would mean Bear would have to find another buyer, possibly JC Flowers.
An offer of $20 or less would be well below Bear's closing stock price of $30.85 on Friday, which was already down 47% for the day. As one senior Bear executive--who like most of the senior team is paid and continues to hold Bear stock--puts it: "based on the information i'm getting, lets just say I wont be retiring early."A JP Morgan spokeswoman could not be reached for comment.
Saturday, March 15, 2008
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