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For bankers used to making millions of dollars in bonuses, $400,000 might seem like a big comedown. Goldman Sachs (GS) has elected to make that the cap for cash compensation for everyone at the firm including partners.
Some bonuses will drop by 80%.
Daily Archives: December 17, 2008
Goldman Sachs (GS) Cuts Bonuses, Cash Cap At $400,000
Nike Skirts Around Recession, So Far (NKE, UA)
Nike Inc. (NYSE: NKE) seems to be avoiding the recession so far. Not entirely, but much better than other we have seen. The sports apparel giant made a profit of $391 million, or $0.80 EPS. It posted roughly an 6% gain in revenue from last year’s quarter to $4.6 billion. The estimates from Thomson Reuters (First Call) were $0.79 EPS and $4.73 billion in revenue.
Take-Two Sees 2009 As Cold Year In Hell (TTWO, ERTS)
Take-Two Interactive Software Inc. (NASDAQ: TTWO) just joined the ranks of video game publishers with bad earnings. Real bad earnings. And thank heavens for non-GAAP accounting. The company posted a GAAP loss of -$0.10 EPS and non-GAAP earnings of $0.02 EPS; and revenue was $323.4 million. Thomson Reuters (First Call) had estimates of $0.05 EPS and $325.77 million in revenue. It gets worse.
The 52-Week Low Club (NT)(BGP)(NTII)(DXYN)
Nortel (NT) Still falling on Chapter 11 concerns. Falls to $.26 from 52-week high of $16.07.
Borders Group (BGP) No one buys books from stores anymore. Drops to $.56 from 52-week high of $11.67.
Neurobiological (NTII) Stroke drug trial gone wrong. Plunges to $.19 from 52-week high of $3.47.
Dixie Group (DXYN) No news, just selling. Off to $1.85 from 52-week high of $9.55
Douglas A. McIntyre
Rumors That Jobs Lives Keeps Apple (AAPL) Well Above Multiyear Lows
Rumors from Apple (AAPL) headquarters in Cupertino that Steve Jobs is alive and well are keeping the company’s shares well above their multi-year low of $79.14 hit a few weeks ago. Shares are trading at $89.16, down a little over 6% for the day.
Given that Goldman Sachs, Oppenheimer, and Calyon downgraded the stock and that research shows that Mac sales dropped in November, the stock is doing extraordinarily well.
The stock should hold at this level until the company announces earnings for the holiday quarter. Expectations have been set so low that the shares will probably skyrocket on any reasonable results.
Douglas A. McIntyre
Royal Gold, Envy of Chartists & Gold Bugs (RGLD, ABX, MFN, GG, NEM, GDX)
In the current climate, there are hardly any stocks which are hitting new 52-week highs. If you go to the gold sector, the leaders are very far under their highs. Apparently, it seems that Royal Gold Inc. (NASDAQ: RGLD) did not get the memo that its peers are well off of highs and that there are problems with the stock market. Shares of Royal Gold are at 52-week and all-time highs. There may be good reason too.
Constellation, The French, Buffett & A Value Trap (CEG, BRK-A)
The other shoe has dropped. Constellation Energy Group Inc. (NYSE:CEG) has accepted Electricite de France’s (EDF) offer of $4.5 billion for 49.99% of the company’s nuclear assets (rather than the whole company). We detailed the offer two weeks ago when it was announced. The total value of the deal is about $6.5 billion.
Constellation has terminated its merger with MidAmerican Holdings, a subsidiary of Warren Buffett’s Berkshire Hathaway Holdings (NYSE:BRK-A). MidAmerican’s offer totaled about $4.7 billion for all of Constellation’s assets. MidAmerican collects a breakup fee of $175 million. What is interesting is that the stock options have never valued Constellation anywhere near what the headlines would have you believe.
Capital Spending Falls Off a Cliff (DVN, SD, ME, HES, EQT)
We’ve been following recent announcements of pullbacks in capital spending in the oil and gas patch. Every day it seems, one or two more companies announce that capital spending will be cut by up to 50% from previously announced numbers.
Today’s crop of thrifty companies includes Devon Energy Corporation (NYSE:DVN), SandRidge Energy Inc. (NYSE:SD), and Mariner Energy, Inc. (NYSE:ME). Actually, Devon only announced that it would announce its 2009 capital budget "in early 2009" when it reports earnings for 2008. This is news because the company historically disclosed its spending plans in December for the following year. This development is not unlike Apple’s announcement that Steve Jobs won’t be attending the Macworld this year.
OPEC To Cut By 4.2 Million Barrels A Day, More Than Twice Expectation
So much for deflation worries, and so much for an early end to the recession.
OPEC shocked the market by saying it will cut production by 4.2 million a day. Most comments from the cartel and analysts said the drop was supposed to be 2 million barrels. After a further look, that 4.2 million barrel per day number may be misleading.
24/7 Wall St. Hooks Up With Twitter
Two weeks ago we announced that we were going to start using Twitter to communicate with our readers. As of today, we are happy to say that our efforts have been warmly received by both our readers and the Twitter community. If you haven’t already, check out what all the fuss is about here: twitter.com/247wallstIf you haven’t heard about our efforts or want to learn more about why Twitter makes sense for you as a 24/7 reader, please read the following announcement and watch the brief (and amusing) video about how Twitter works.
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Posted Without Comment: Credit Crisis Cost Tops $1 Trillion
According to Bloomberg, "Losses and writedowns from the credit crisis surpassed $1 trillion today, and show little sign of ending, as Morgan Stanley marked down the value of mortgages and leveraged loans."
"The losses have caused bank failures from the U.S. and the U.K. to Germany and Iceland, forcing governments to increase borrowing and buy stakes in financial companies. The U.S. alone is spending $700 billion, almost half of which will go directly into banks and insurers, in what has become the worst financial crisis since the Great Depression."
Douglas A. McIntyre
Is Newell Rubbermaid Now Dead Money?
There are many stocks which are supposed to be at least somewhat immune to the recession. This notion has become less and less true, even if some of the former recession-proof stocks have not fallen so much as others. It seems no earnings are sacred, and that is now also the case at Newell Rubbermaid Inc. (NYSE: NWL).
Motorola Plays Pin the Tail on the Employee (MOT)
Motorola, Inc. (NYSE: MOT) may be one of the restructuring nightmares of the decade. This morning the company is taking further steps in its restructuring by announcing "cost cutting measures"…. Another sign that business is booming. Wink, wink.
SIPC’s Role In Madoff-Of-All-Scams Could Save The Stock Market
The SIPC came out with a statement last night indicating that they will be involved in the Madoff situation. The SIPC maintains a special reserve fund authorized by Congress to help investors at failed brokerage firms. The SIPC reserves are available to satisfy the remaining claims of each customer up to a maximum of $500,000, including a maximum of $100,000 for cash.
It seems likely that most, if not all, of the statements Bernard Madoff delivered to clients were entirely bogus. Based on the SIPC mandate, it could be in the realm of possibility that the SIPC has to buy securities to replace those that were faked on statements delivered to Madoff clients.
No Goldman Reaction for Morgan Stanley (GS, MS)
Yesterday was a rather odd day in more than one way. The reaction to Goldman Sachs Group (NYSE: GS) was given a warm reception, despite the much wider losses than expected, the negative revenues after items, and the mark-downs. This morning, Morgan Stanley (NYSE: MS) came out with much of the same sort of news with wider losses, etc… Yet there is no mercy, no applause, and not even a Swiss-themed neutrality nor indifference.
Top 10 Pre-Market Analyst Upgrades & Downgrades (ACTI, BCE, KSU, MYL, TEVA, AXP, AAPL, ROCK, SNV, TKC)
It is getting rather thin in analyst coverage, but these are the top ten analyst upgrades and downgrades we have seen this Wednesday morning:
- ActivIdentity (NASDAQ: ACTI) Started as Buy at Stanford Group.
- BCE (NYSE:BCE) Raised to Buy at UBS.
- Kansas City Southern (NYSE:KSU) Raised to Buy at UBS.
- Mylan (NYSE:MYL) Started as Overweight at JPMorgan.
- Teva (NASDAQ: TEVA) Started as Overweight at JPMorgan.
- American Express (NYSE:AXP) Started as Reduce at SunTrust Robinson Humphrey.
- Apple (NASDAQ: AAPL) Cut to Perform at Oppenheimer.
- Gibralter (NASDAQ: ROCK) Cut to Sell at Piper Jaffray.
- Synovus Financial (NYSE:SNV) Cut to Neutral at JPMorgan.
- Turkcell (NYSE:TKC) Cut to Neutral at JPMorgan.
Jon C. Ogg
December 17, 2008
As Recession Visits, China’s Middle Class Riots
"One riot, one Ranger"–inscription on statue dedicated to Texas Rangers, 1960.
During the last century, Texas was long on land and short on lawmen. That means that each dispute got one constable.
The Chinese should be so lucky. Unrest is becoming so great among the middle class that the central government may have to turn out the entire Red Army. Cities facing strikes and unrest are spread across hundreds of miles, distant from Shanghai and Beijing.
Citigroup Reorganization: Playing With Toy Soldiers
Citigroup (C) will probably merge its commercial bank and investment bank. That makes sense. They both serve corporate customers. Investment banking fees are down and so is corporate lending. Efficiency is the battle cry of financial firms everywhere.
Citi has shown that it has bad luck with improving earnings and efficiencies by firing people and trying to reorganize its divisions. This move will probably not be much different.
Who Made All The Money That Madoff Lost?
No one knows where Madoff’s money went. It would be hard for him to spend $50 billion on himself. He could have secretly sent it to charities round the world. That would make him the greatest "Robin Hood" of all time.
A more simple explanation is that he lost the money trade after trade, year after year. He took in more cash from investors and paid a little out in redemptions. When redemptions got too large, he confessed.
For The Fed “There are no second acts in American lives.”
F. Scott Fitzgerald was right. One chance and one chance only. The Fed took its last step by cutting rates to zero and saying it will buy up all of the debt it can find, perhaps a trillion dollars worth. The market reacted with some relief, but the agency does not have another approach to take now. It has shown its plan. Over the next two or three months, the credit markets will sharply improve or not. If nothing gets significantly better, what happens next?
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