Posts for Ticker ‘BSC’

Media Digest 4/29/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

According to Reuters, Cadbury is looking at buying Hershey.

Reuters writes that banks being sued by Clear Channel (CCU) have asked for a delay of a Texas trial.

Reuters reports that share of Visa (V) fell on quarterly results

Reuters reports that Lewis Ranieri who helped create the current mortgage market says that house prices are off more than most analysts think.

Reuters writes that the Fed is thinking about paying interest on bank reserves.

Reuters reports that big US media companies are expected to have good first quarters because of their cable properties.

The Wall Street Journal writes that the CEO of Calpers will step down.

The Wall Street Journal also writes that a former senior Fed official blasted the bail-out of Bear Stearns (BSC).

The Wall Street Journal writes that airlines are trying to push their fares up.

The Wall Street Journal writes that the Fed will propose new and tighter policies for issuing credit cards.

The Wall Street Journal reports that Take-Two’s (TTWO) Grand Theft Auto IV game is expected to post record sales.

The Wall Street Journal reports that GM (GM) will idle some of its truck and SUV plants.

The Wall Street Journal reports that the FDA turned down a major new Merck (MRK) drug.

The Wall Street Journal writes that Blockbuster (BBI) is seeking a stake in Viacom’s (VIA) new premium cable TV venture.

The Wall Street Journal reports that Citigroup (C) may cover some of the losses at two hedge funds.

The Wall Street Journal writes that circulation at most large newspapers dropped sharply.

The New York Times writes that rising oil prices are not stimulating new production.

The New York Times reports that United (UAUA) is in merger talks with US Airways (LCC).

The New York Times writes that the WB TV network will return as a website.

The FT reports that Deutsche Bank (DB) had its first loss in five years.

The FT writes that the Saudis will launch a $5.3 billion sovereign fund.

The FT writes that the Rockefeller family is pushing for Exxon (XOM) to have a more independent board.

Bloomberg reports that profits at BP (BP) rose sharply.

Douglas A. McIntyre

Posted on: April 29, 2008 – 2:40 am in Press Digest, , , , , , , , , , , , , ,

Former Fed Official Call Bear Stearns Deal “the worst policy mistake in a generation”

Why hold back feelings? Vincent Reinhart, former head of monetary affairs at the Federal Reserve called the deal to save Bear Strearns (BCS) by backing a sale to JP Morgan (JPM) was "the worst policy mistake in a generation," according to The Wall Street Journal.

He argued that the Fed had several other options such as taking a "tougher line" with J. P. Morgan; cultivating other suitors; selectively removing certain assets from Bear’s portfolio; or accelerating implementation of the Fed’s new offer to temporarily swap U.S. Treasury from its portfolio for Bear’s less liquid assets, the paper reported.

Douglas A. McIntyre

Posted on: April 28, 2008 – 6:02 pm in Financial Stocks, ,

Media Digest 4/15/2008 Reuters, WSJ, NYTImes, FT, Barron’s

According to Reuters, Northwest (NWA) and Delta (DAL) will merge to create the world’s largest airline.

Reuters writes that the profit at Bear Stearns (BSC) fell 79%.

Reuters reports that Continental (CAL) and United (UAUA) have laid most of the groundwork for a merger.

Reuters writes that banks are more likely to sell shares at a discount as Q1 losses mount.

Reuters reports that Treasury want more disclosure from hedge funds on assets.

Reuters writes that Singapore sovereign fund Temasek may raise more capital after losing money on US investments.

The Wall Street Journal writes that oil production in Russia may be falling and could continue to do so.

The Wall Street Journal writes that Brazil has made a huge offshore oil discovery which could turn it into one of the wolrld’s largest oil producers.

The Wall Street Journal writes that Nissan and Chrysler will built full-sized pick-ups in a joint venture.

The Wall Street Journal writes that the US could lose its AAA rating if it has to rescue Freddie Mac (FRE) and Fannie Mae (FNM).

The Wall Street Journal reports that earnings from Google (GOOG), IBM (IBM), and Caterpillar (CAT) may confrim whether GE’s (GE) earnings are part of a trend or an aberration.

The FT writes that Citigroup (C) is allowing pivate equity firms to cherry pick its LBO loans to find which ones they want to buy,

The FT reports that Wal-Mart (WMT) plans to expand in Russia and Eastern Europe.

The FT writes that  "Tranche warfare" has broken out in the $450bn market at the heart of the
credit crunch as hard-hit investors scrap over the pools of debts that
make up so-called collateralised debt obligations.

Douglas A. McIntyre

Posted on: April 15, 2008 – 2:35 am in Press Digest, , , , , , , , , ,

Wall St.’s New Superdelegates (GS)(MS)(JPM)(C)(MER)(AIG)

A decade ago, when there were big problems in the financial markets a very small group of people came in for the fix. E. Gerald Corrigan, a man of massive girth and intellect, ran the Federal Reserve Bank of New York. Sandy Weill was at the newly formed Citigroup (C), Hank Greenberg ran the world’s most successful insurance company, AIG (AIG). And, at The New York Stock Exchange sat Dick Grasso, who had worked there for almost three decades. Grasso was so powerful that he could shut down trading with just a few phone calls. He had been through 1987 and 2001.

Grasso, Greenberg, and Weill all claim that, like Hamlet’s father, someone poured poison into their ears while they slept. The evidence of that is either lost or hidden.

In the current crisis, many of he usual suspects have no power to sit at the table when the trouble rains down. Thain, head of Merrill Lynch (MER) and former CEO of NYSE, probably wishes he had never left as co-president of Goldman Sachs (GS). Merrill has been emasculated by losses. John Mack, who has run every large investment bank in the world, now keeps bodyguards so the Morgan Stanley shareholders will not not tar and feather him. The house of Morgan has lost its teeth. At Citi, Weill’s creation, the talk of survival mixes with discussions of breaking the firm into pieces. Just yesterday, John Reed, who helped create Citi a decade ago, said the whole thing was a bad idea.

The government, now run, at least on the financial side by new men, Bernanke and Paulson, has turned to what is left of the better banks and investment houses. Paulson looks to his old home, Goldman Sachs, for aid. James Dimon at the head of JP Morgan was begot by Weill and then sacrificed when Citi was created. He as a healthy balance sheet and a score to settle.

The Buddha-like figure at the center of much of the rescue of Wall St. is Lloyd Blankfein. He has only been CEO of Goldman for a short time. During that period his traders bet that mortgage-back securities would fall apart and made billions of dollars on that bet. This happened at about the same time his sales force was marketing the ill-fated subprime derivatives to customers. Goldman also helped sink Bear Stearns by indicating that it was not confident in doing business with the troubled brokerage. Blankfein is rarely visible and may only come out at night.

For better or worse all of the most troubling aspects of the financial markets will have to be run by Bernanke, Paulson, Dimon, and Blankfein. The first two have the power of the purse-strings. The other two have the only big financial company balance sheets that the Fed and Treasury trust.

In a storm, that is not many people to row the boat.

Douglas A. McIntyre

Posted on: April 4, 2008 – 5:57 am in Economy, , , , ,

Fed Puts Spies At Brokerage Firms (GS)(MS)(BSC)(MER)(LEH)

The Fed does not want to see all the money it has give to brokerages in exchange for lousy paper to go down the toilet so it has stationed its own personnel in the firms to keep and eye on things.

According to The Wall Street Journal "For the first time in more than a decade, the Federal Reserve has set up shop inside brokerages to monitor their financial condition" Bernanke has been reading George Orwell’s "1984"

The sleuths are stationed at Goldman Sachs (GS), Bear Stearns (BSC), Morgan Stanley (MS), Lehman (LEN), and Merrill Lynch (MER).

It is too much to hope that they will not find anything.

Douglas A. McIntyre

Posted on: April 3, 2008 – 8:14 am in Brokerage Firms, , , , ,

Media Digest 4/3/2008 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, The Treasury said that regulators saved Bear Stearns (BSC) to help the markets.

Reuters writes that Sony (SNE) will cut costs and boost order to fight the strong yen.

Reuters writes that LG Telecom may offer 3G service on a Google (GOOG) platform.

Reuters reports that RIM (RIMM) earnings did much better than expected.

The Wall Street Journal writes that the Senate agreed on a $15 billion housing stimulation bill.

The Wall Street Journal writes that GM (GM) may do more to help Delphi out of bankruptcy.

The Wall Street Journal writes that Live Nation (LYV) is near a $150 million deal with rapper Jay-Z.

The Wall Street Journal reports that AT&T (T) plans to use Google Android in some of its hansets.

The Wall Street Journal writes that an activist investor has called the Circuit City (CC) turnaround a disaster.

The Wall Street Journal writes that a judge ordered a probe of lending practices at Countrywide (CFC).

The Wall Street Journal reports that analysts say that sell-off in cable shares was overdone.

The Wall Street Journal reports corn is near the $6 level.

The New York Times writes that a bill for the FDA to regulate tobacco is going to the full House for a vote.

The FT writes that as nornal source of home loans have fallen Fannie Mae (FNM) and Freddie Mac (FRE) are driving new mortgages.

Bloomberg writes that George Soros sees the current downturn as the worst since the Depression.

Douglas A. McIntyre

Posted on: April 3, 2008 – 2:50 am in Press Digest, , , , , , , , ,

News Digest 4/2/2008 Reuters, WSJ, NYTImes, FT, Bloomberg

According to Reuters, Lehman (LEH) raised $4 billion.

Reuters writes  that US factory orders probably fell in February.

Reuters reports that the Fed approved the JPMorgan (JPM) purchase of Bear Stearns (BSC)

Reuters writes that CBS (CBS) news will cut staff.

Reuters reports that Huawei is not interested in buying Motorola’s (MOT) handset division.

The Wall Street Journal writes that the $29 billion loan to Bear Streans is made up primarily of mortgage-back securities.

The Wall Street Journal writes that major auto companies including Ford (F) and GM (GM) had a huge sales slump in March.

The Wall Street Journal writes that Intel (INTC) is making progress providing chips for mobile devices.

The Wall Street Journal reports that an airline association downgraded it forecasts for industry profitability in 2008.

The New York Times writes that a bi-partisan bid to help mortgage holder is gaining momentum.

The New York Times writes that the Shanghai market has dropped 45% since October.

The FT writes that the market rally could be partially due to short-sellers retreating from the market.

Money raised by Lehman and UBS (UBS) may signal an end to the rout in the equities market

Douglas A. McIntyre

Posted on: April 2, 2008 – 2:48 am in Press Digest, , , , , , , , ,

Another Bear Stearns Director Unloads Shares (BSC, JPM)

Another director of Bear Stearns Companies, Inc. (NYSE: BSC) has unloaded his holdings as the stock was trading north of a buyout price for some time.  Paul A. Novelly, a director, has unloaded 125,000 shares in a direct share sale with an average sale price of $10.67. 

The sale date was listed as March 28, 2008, which would have been last Friday.  His share holdings are now also listed as ZERO.  Jimmy Cayne did the same last week.  If these guys thought a much higher bid was coming shortly, would they be unloading their stock after JPMorgan Chase & Co. (NYSE: JPM) already juiced its buyout offer for a better public relations campaign?

This says that Novelly’s sale did not include 3,523.244 shares held in the Non-Employee Directors’ Stock Option and Stock Unit Plan.

We frequently discuss restructurings, insider activity, activist investor trends, IPO’s, back door plays into IPO’s, SPAC’s, spin-offs, and more on our open email distribution list.

Regardless of if a higher bid will or won’t materialize, shares are up 4.1% at $10.92 in late-afternoon trading before the close.

Jon C. Ogg
April 1, 2008

Jon Ogg produces the Special Situation Investing Newsletter and he can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: April 1, 2008 – 2:55 pm in Brokerage Firms, Insider Activity, ,

UBS (UBS) Presages US Bank Earnings (C)(MER)(MS)

At UBS (NYSE: UBS) it all hit the fan today. Marcel Ospel, the bank’s chairman, is on the way out. The financial firm wrote-off another $19 billion. The company plans to raise $15 billion after a Q1 loss of about $12 billion.

The most hopeful take Wall St. can have is that problems at US banks and brokerages are not as bad. But, the truth is that they could be worse. Goldman Sachs recently wrote that total write-offs for subprime and other bad credit will hit the system for $460 billion. Only $120 billion of that has been written off.

Investors would need to hope that the class of assets held by UBS are radically different from what Citigroup (NYSE: C), Morgan Stanley (NYSE: MS), Merrill Lynch (NYSE: MER), and other US financials have. That is possible, but not likely.

US financials have other exposures. Hedge funds had their worst Q1 in recorded history. Much of the capital base of that industry is borrowed from banks. In liquidations it is likely that not all of that will come back.

The press has not written much about SIVs, but they still exist in relatively large numbers. Some will fail because of their own derivative paper investments. Banks will end up bailing more of them out.

There are still great unknowns. The credit-default swaps market helped sink Bear Stearns (NYSE: BSC). According to The Wall Street Journal "Such swaps were written against $45 trillion of underlying debt as of the first half of 2007." If junk bond defaults go up, and they will, this market will get hit very hard. Banks and brokerage companies play in this sector, too.

If the Goldman estimate is even close to being true, US financial companies may still face $200 billion in write-offs. The flight of capital to 10-year Treasuries recently say that the "insiders" in the market think something is wrong.

Even Einstein, if he were still with us, could not plumb the depths of these troubles, but count on this. The largest banks and US brokers could face as much as $15 to $20 billion more in write-offs each. Given the states of the housing, LBO, credit swap, and hedge fund markets, it is not just possible, it is probable.

For a firm like Citigroup that could mean raising another $10 billion or more. The dilution could take that stock down to $15, if shareholders are lucky.

Douglas A. McIntyre

Posted on: April 1, 2008 – 4:41 am in Financial Stocks, , , , ,

Will Financial Stocks Make New Lows? (C)(JPM)(LEH)(MER)(WM)(WB)(MS)(WFC)

There has been some misplaced optimism that financial stocks bottomed earlier this month based on the notion that much of the bad news about write-offs had come out. Mid-month, the Fed increased the amount of money available to banks to $200 billion. The collateral the agency is willing to take is not of a much higher grade than wall paper.

Last week, unexpectedly, financial shares took a terrible turn South. Among the really large companies in the group most were off 10%. Lehman (NYSE: LEH), Washington Mutual (NYSE: WM), Merrill Lynch (NYSE: MER), and Wachovia (NYSE: WC) were down much more. As money moved into 10-year Treasuries at a rapid pace, Wall St. was signaling that it wanted out of the sector. Something is still rotten in De mark.

Oppenheimer downgraded earnings estimate for a number of companies in the sector last week. There are still rumors that Lehman is in trouble. The market’s move into Treasuries may have something to do with that. The news that Lehman was bilked out of $250 million is not likely to help the shares.

Citigroup (NYSE: C) is now back below $21. If it drops another $3, it would breach its low. Wachovia is only slightly above its period low. Merrill (NYSE: MER) is close. And, Lehman fell every day last week.

Goldman Sachs estimates that US financial companies will eventually have credit losses of $460 billion. Only $120 billion of that has been written off already. Wall St. is concerned that there will be another Bear Stearns-like (NYSE: BSC) event. If most of the banks and brokerages make lows this upcoming week the majority of traders see something extremely bad coming.

The disaster which began last summer has not reached, to any great extent, the  home equity loan markets, money market pools. or the derivative credit swaps market. It only takes one more explosion to bring on another crisis.

Douglas A. McIntyre

Posted on: March 30, 2008 – 11:39 am in Financial Stocks, , , , , , , , ,

Media Digest 3/28/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

According to Reuters, Bank of America (BAC) will pay the president of Countrywide (CFC) $28 million to stay and run the company after the buy-out is complete.

Reuters writes that the chairman of Bear Stearns (BSC) sold all of his stock in the company for $61 million.

Reuters writes that Xerox (XRX) will pay $670 million to settle a securities lawsuit.

Reuters reports that JP Morgan (JPM) is trying to integrate Bear Stearns operations as they begin to fall apart.

According to The Wall Street Journal, Citigroup (C) has hired an outsider to run its huge US consumer bank.

The Wall Street Journal writes that ad-click data for Google (GOOG) was disappointing for the second time in two months.

The Wall Street Journal writes that tech firms holding auction-rate securities are beginning to post write-offs due to their falling value.

The Wall Street Journal writes that AT&T (T) plans to launch a mobil TV service for its handset subscribers.

The Wall Street Journal writes that the number of cellphones with GPS is rising rapidly.

The Wall Street Journal writes that recent numbers suggest that China may have passed the US in total number of internet users.

The New York Times writes that a China anti-monopoly law could hurt Microsoft’s (MSFT) bid for Yahoo! (YHOO).

The FT writes that M&A activity is at a four-year low.

The FT writes that rice prices are up 30% to an all-time high.

Bloomberg writes that Fannie Mae (FNM) and Freddie Mac (FRE) may have to raise $20 billion in new capital.

Douglas A. McIntyre

Read More »

Posted on: March 28, 2008 – 2:53 am in Press Digest, , , , , , , , , , , ,

Bear Stearns (BSC): James Cayne Does Something Right For Once

James Cayne, chairman and, before he was asked to leave, CEO of Bear Stearns (NYSE: BSC) sold all of his holdings in the firm for $61 million, according to filings with the SEC. We noted today that Cayne sold 5.66 million shares at $10.84 apiece on March 25.

When the shares were over $170 last year, he was doing even better.

Cayne developed a reputation of being busy playing golf and had been accused publicly of smoking pot while his firm was falling apart. Cayne also plays bridge, and for once he was keeping his eyes on both his cards and the money in the center of the table.

The chairman probably reasoned that $10 was as good as it would get for Bear Stearns. There has been a lot of wild talk about a higher offer. Now Congress wants to look into the Fed’s role of supporting JP Morgan (NYSE: JPM) in its buy-out of Bear. They don’t understand that the central bank now has an M&A department

The whole deal still has risk in it. JP Morgan has gotten its hands on the BSC headquarters and enough of the company’s shares to close a deal. But, investors are already filing suits saying that they were robbed when the big money center bank offered $2 for the broker and then upped it to $10. It did look like a bank job done under the cover of darkness, or, in this case, on the weekend.

A lot of Congressmen who still like to eat with their fingers feel the need to have hearings. It does not occur to them that so much money was withdrawn from Bear Stearns by large customers that the company could not last another day. Bernanke and his friends did not invent that story. Putting $30 billion into the deal is not likely to be their idea of a good time.

Cayne took the money and ran. He did the right thing. As captain, or captain emeritus, he left the ship early. Lifeboats were still aplenty. But, he is an old man and age has its privileges.

The ridicule will start now and last for years. Cayne should have stayed in the stock to show confidence in the JPM deal. The collapse of the firm was at his feet. Any risk going forward should be shared by him.

Why stay around when you are not wanted? He leaves now along with a huge number of Bear employees who are getting the shaft in the merger.

Will the last one to leave please turn out the lights?

Douglas A. McIntyre

Posted on: March 27, 2008 – 5:39 pm in Brokerage Firms, ,

Jimmy Cayne Unloads All Bear Stearns Stock (BSC, JPM)

Bear Stearns Companies Inc. (NYSE: BSC) has an SEC filing out showing that Chairman James "Jimmy" Cayne sold shares the day after JPMorgan Chase (NYSE: JPM) sweetened its bid offering to $10.00.

On March 25, Cayne sold 5,612,922 shares at $10.84 and this says that his direct beneficial ownership of Bear Stearns stock is now ZERO.  His wife also sold 45,669 shares at $10.84.

Shares of Bear Stearns closed up 0.18% at $11.23 in normal trading, but shares are down some 4.6% at $10.71 in after-hours.

Maybe some are still hoping for an even higher-yet buyout price, but itdoesn’t look like Cayne does.  Either that or he needed more cash toplay card games.

Jon C. Ogg
March 27, 2008

Jon Ogg produces the Special Situation Investing Newsletter and can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: March 27, 2008 – 3:33 pm in Brokerage Firms, Insider Activity, ,

Media Digest 3/27/2008 Reuters, WSJ, NYT, FT, Bloomberg

According to Reuters, Oppenheimer cut is earnings forecasts for Merrill Lynch (MER) and UBS (UBS) a day after cutting Citigroup (C) and Bank of America (BAC).

Reuters reports that the Meriwether hedge fund is down 28% so far this year.

Reuters reports that Tata Motors say it purchase of Jag and Rover from Ford (F) will improve its balance sheet.

Reuters writes that the buyers of Clear Channel (CCU) have sued banks to close the $19 billion deal.

Reuters writes that earnings at Oracle (ORCL) missed some estimates and the stock fell.

Reuters also reports that Motorola (MOT) will split itself into two companies.

The Wall Street Journal writes that Comcast (CMCSA) and file sharing company BitTorrent will work together.

The Wall Street Journal reports that AMD (AMD) has launched its new family of chips.

The Wall Street Journal reports that Paulson want the Fed to have more power over securities firms.

The Wall Street Journal writes that Citigroup has settled a large lawsuit over the Enron collapse.

The Wall Street Journa reports that Nokia (NOK) is making a number of moves to take handset share in the US.

The New York Times writes that home equity loans may be the next round in the credit crisis.

The New York Times reports that Congress is demanding details about the Bear Stearns (BSC) deal.

The New York Times writes that Take-Two (TTWO) has rejected an offer from Electronic Arts (ERTS).

The New York Times reports that oil moved up sharply to $106 a barrel.

The FT writes that Rambus (RMBS) won a major patent suit

Bloomberg writes that taxpayers may be liable for billions of dollars from Fed and Treasury efforts to help financial firms.

Douglas A. McIntyre

Posted on: March 27, 2008 – 2:55 am in Press Digest, , , , , , , , , , , , ,

Financial Write-Downs May Just Be Starting (C)(BSC)(JPM)

Goldman Sachs says that write-downs for subprime mortgage paper, LBOs, credit cards,and other bad paper could hit banks and brokerages for $460 billion. That is almost three times the write-offs taken by financial firms so far.

According to Bloomberg, Goldman "estimated that residential mortgage losses will account for half the total, and commercial mortgages as much as 20 percent.."

If the number is anywhere close to being true, Bernanke and Paulson, who now basically run the US, have a problem which even they cannot solve. The banks have tapped the Fed for about $200 billion. Where the next $250 billion would come from is anyone’s guess.

It will not come from sovereign funds They have already lost money on almost every bank and brokerage where they have invested. Comments from the big Middle East funds indicate that they think that companies like Citigroup (C) have a long way to go in cleaning up their balance sheets.

The Fed has one chance to salvage its own savings account. It can do for the rest of the financial system what it did with Bear Stearns (BSC). It went to JP Morgan (JPM) and had the bank buy the brokerage but put up $30 billion as a back-stop. If JPM does well, the Fed will not have put all of that money into a sink hole. It will go back into the Fed’s account.

The Fed could do the same thing for a number of the largest brokerages and banks. It could go to sovereign funds and say "put up $100 billion and buy a nice piece of these companies", If things fall apart, we will guarantee some of your investment. The sovereigns would have risk, but it would not be unlimited.

Or, the Fed can put up money that it does not have and knee cap the taxpayer. If the economy gets much worse that taxpayer won’t have the money to pay his taxes.

Douglas A. McIntyre

Posted on: March 26, 2008 – 5:13 am in Brokerage Firms, , ,

Media Digest 3/26/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

According to Reuters, Comcast (CMCSA) and Time Warner Cable (TWC) are in talks to fund a wireless venture to be operated by Clearwire (CLWR) and Sprint (S).

Reuters writes that new home sales probably dropped again in February.

The Wall Street Journal writes that the stock market is trading where it was nine years ago moving in the direction of downturns in the 1930s and 1970s.

The Wall Street Journal writes that JP Morgan (JPM) has already started to put the primary brokerage part of Bear Streans (BSC) into its own operation beginning what will be a larger integration.

The Wall Street Journal writes that the Clear Channel (CCU) buy-out is near a collapse.

The Wall Street Journal writes that Ford (F) will announce its plan to sell Jaquar and Rover to Tata.

The New York Times writes that China shipped $12 billion in engine auto parts last year, pressuring the industry in North America.

The FT writes that banks are hoarding money and not passing on rates from centrail banks to customers.

The FT reports that banks in the The Federal Home Loan Banking system want to start a "mononline" insurance business to help local government bonds.

Bloomberg writes that Goldman Sachs believe write-offs at US banks and brokerages may hit $460 billion, four times that amounts already disclosed.

Douglas A. McIntyre

Posted on: March 26, 2008 – 2:49 am in Press Digest, , , , , , , ,

Media Digest 3/25/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

According to Reuters, the Justice Department has approved the Sirius (SIRI) merger with XM Satellite (XMSR).

Reuters writes that JP Morgan (JPM) raised its offer for Bear Stearns (BSC) and took a large stake in the company.

Reuters reports that 20,000 jobs could be cut on Wall St. over the next two years.

The Wall Street Journal writes that foreclosres are sending home prices lower as they flood the market with new inventory.

The Wall Street Journal reports that Carl Icahn rejected a deal of two board seats at Motorola (MOT).

The Wall Street Journal writes that Delphi is seeking an extension on the date when its exits Chapter 11.

The Wall Street Journal writes that Google (GOOG) is pressing the FCC on the use of TV airwaves.

The Wall Street Journal says Dell (DELL) claims its sales in India hit $700 million.

The Wall Street Journal reports that the buy-out of Bear Stearns (BSC) could be decided by Congress.

The New York Times writes that Ford (F) is near the sale of its Jaguar and Rover units to Tata.

The FT writes that private equity companies now hold a number of "zombies" companies worth less than the debt they carry.

Bloomberg writes that the price of corn and wheat rose due to poor weather.

Douglas A. McIntyre

Posted on: March 25, 2008 – 2:50 am in Press Digest, , , , , , , ,

As Bear Stearns (BSC) Trades Above JP Morgan (JPM) Offer, Bernanke Looks Like Boob

JP Morgan (NYSE: JPM) revised its $2 offer for Bear Stearns (NYSE: BSC) up to $10. Bear now trades at $11.40. Someone may think that JPM or another entity may come in even higher.

The lesson here is that the Fed will negotiate with crippled financial institutions. It is bad business because it takes away the central bank’s dictatorial patina.

When the next disaster comes along, the Fed may not find it so easy to make an offer and stick to it. The precedent with Bear Stearns will prevent that

Douglas A. McIntyre

Posted on: March 24, 2008 – 9:42 am in Uncategorized, ,

Selling A Piece Of The Federal Reserve

There is growing concern about where the Fed will get the hundreds of billions of dollars it will need to bail-out failing banks and brokerages. Most economists point to the tax-payer as the ultimate source, either through inflation or minting new money. All of its works its way back to John Q. Public.

Over at Treasury, Paulson has been beating the daylights out of sovereign funds to get them to agree to put money into US companies only if the reasons for the investments are purely financial. No political agenda allowed. Most of the funds from the Middle East, China, and Singapore have already left the building. The risks of putting more cash into US financial firms has become to great. Many of the big pools of capital have already lost a lot of money on investments in Blackstone (NYSE: BX), Citigroup (NYSE: C), and Merrill Lynch (NYSE: MER). Better for sovereign funds to put capital into coffee plantations in Honduras.

Paulson and the Fed could get the sovereign funds back into the market. Instead of the US government putting up all of the money for fixing the banking system it might ask the big overseas funds to put capital into financial companies side-by-side with the central bank. That would take a little pressure off the system.

A good example of how this might work is that Abu Dhabi could put up a piece of the $30 billion for JP Morgan’s (NYSE: JPM) buyout of Bear Stearns (NYSE: BSC) Instead of the US government guaranteeing all of that, perhaps it would back $15 billion. Let the sovereign fund take a partial risk for putting in the first tranche of capital and let it get the first reward if the deal works.

Sovereign funds may have pulled out of the US. Investing side-by-side with the Fed might get them back and it could save taxpayers a few dollars down the road.

Douglas A. McIntyre

Posted on: March 24, 2008 – 5:27 am in Economy, , , , ,

JP Morgan Cries “Uncle” (JPM)(BSC)

Samson has been shorn of his locks and blinded.

JP Morgan (NYSE: JPM), it appears, will raise its bid for Bear Stearns (NYSE: BSC) from $2 a share to $10. It is not necessary and it is hard to imagine why the bank’s shareholders would support it.

According to The New York Times"The sweetened offer is intended to win over stockholders who vowed to fight the original fire-sale deal." But, fight with what? No alternate offer for Bear Stearns has come up. The brokerage is too deep in the mud. Too many of its customers have taken out money. It is only JP Morgan, with $30 billion in cash from the Fed, which was in a position to do a deal. If the Fed withdraws its money, Bear Stearns will almost certainly fail the same day.

The Fed actually asked JP Morgan to spend no more than $2 a share for Bear Stearns. The central bank is frugal where the money center bank may not be, if it raises its offer.

JP Morgan may be concerned that Bear shareholders will try to block the deal because it was the equivalent of a train robbery. But, that is not true. It is Bear’s management, especially the lame former CEO James Cayne, who let his company take huge risks in the hopes of huge rewards, When these did not work out, Cayne could not hold the firm together. It is telling that his board kicked him out as CEO. The governing body at Bear knows what the Fed does. It is not JP Morgan’s fault that the brokerage is going for $2. It is not the Fed’s. Bear Stearns dug its own grave and it is time for it to walk into the hole.

Douglas A. McIntyre

Posted on: March 24, 2008 – 4:08 am in Mergers and Buy Outs, ,