Tuesday, March 17, 2009

Wall Street Breakfast: Must-Know News

Wall Street Breakfast: Must-Know News

by SA Editor Rachael Granby

  • AIG gets slammed on bonuses... AIG's (AIG) announcement that it will spend around $450M on bonuses has caused a political uproar. Obama called the payments an 'outrage' and demanded AIG rescind or repay them, promising he would "pursue every single legal avenue to block" the payments. New York Attorney General Andrew Cuomo, who has subpoenaed the company seeking more information about the bonuses and their recipients, learned that AIG had already released the bonuses in question last Friday. In light of this, White House officials later said the payouts couldn't be recovered from their recipients without a legal fight that would be even more expensive to taxpayers. Instead, the Treasury plans to attach new provisions to the $30B installment of bailout funds approved March 2 in order to force repayment of the bonuses.
  • ...while others look for bonus loopholes. As AIG (AIG) faces widespread outrage over its bonus payments, other Wall Street firms are looking for loopholes in compensation caps. In response to expected bonus restrictions, Citigroup (C), Morgan Stanley (MS) and other recipients of government aid are considering an increase in base salaries for some executives and top employees. Plans are still in an early stage because the government hasn't yet issued specific rules on bonus payments, but critics are ready to cry foul on any attempts to out-maneuver federal pay caps. Separately, U.S. regulators have ruled that shareholders must be allowed to vote on JPMorgan Chase (JPM) measures to tie executive bonuses to the bank's long-term stock performance.
  • Alcoa cuts dividend, capex. Alcoa (AA) announced plans to slash its dividend to $0.03 from $0.17, issue stock and convertible notes worth around $1.1B and trim 2010 capital expenditure by $1B. Alcoa has faced falling demand from the automotive, commercial transportation and construction sectors, pushing its stock to a 21-year low earlier this month and to what will be its second consecutive quarterly loss. CEO Klaus Kleinfeld expects demand to continue weakening, forecasting that global aluminum demand will drop 6-7% this year vs. the 2% drop he predicted in January. Kleinfeld said the company's "actions better prepare Alcoa to manage through a prolonged downturn." Shares fell 9.8% after hours.
  • Mark-to-market begins to waver. The Financial Accounting Standards Board has proposed allowing companies to use 'significant judgment' in valuing assets in inactive markets or under distressed circumstances. The FASB has been under pressure from lawmakers who feel the fair-value rule, also known as mark-to-market accounting, has made the current financial crisis worse. The board will vote on the proposal April 2 and, if approved, companies will be able to apply the revised rule to their Q1 financial statements.
  • One less newspaper. After two months of looking for a buyer, the Hearst Corp. is shutting down the print edition of its Seattle Post-Intelligencer today and moving the business online. Of the paper's staff, 145 employees accepted severance packages while 20 remained onboard to work on the new and free online version of the paper. The 146 year old Seattle Post-Intelligencer was done in by crumbling advertising sales.
  • Gov't goes after Madoff properties. According to court papers, U.S. prosecutors want Bernie Madoff to forfeit more than $100M worth of homes, cars, boats, securities, silverware and a piano, much of which is held in the name of his wife Ruth. In a court filing from early March, the Madoff's lawyer said $69M in property and accounts belong to Ruth Madoff and are not connected to the fraud.
  • Marvelous deal for Gazillion. Marvel Entertainment (MVL) inked an exclusive ten-year deal to allow videogame publisher Gazillion Entertainment to make multiplayer online games based on Marvel's characters. Gazillion and Marvel will share revenue generated from such Marvel characters as Spider-Man and the Incredible Hulk, but exact details of the financial arrangement have not been disclosed. Gazillion's first Marvel-themed game, Super Hero Squad, will launch in 2010.
  • Ackman has Target in sight. Activist investor William Ackman launched a proxy battle to replace five directors at struggling retailer Target Corp. (TGT). Ackman, whose Pershing Square Capital Management hedge fund owns 7.8% of Target stock, says he'll vie for one of the seats up for election at the next annual meeting and will push for "directors with relevant expertise, who can draw from their personal experience when the board has a decision to make."
  • Mexico sets stage for trade war. Mexico placed a tariff on $2.4B of U.S. goods after the U.S. restricted Mexican trucking. The tariff affects around 90 items from 40 states. Mexico's economic minister Gerardo Ruiz Mateos said the measure was taken "for the incompliance of the country in its agreements regarding transport under the North American Free Trade Agreement... That is what is commonly known as measures of retaliation."
  • NY Mfg worsens. The Empire State Manufacturing survey showed New York manufacturing deteriorated significantly in March. Business conditions fell to a fresh low, while new orders and shipments also dropped sharply to record lows.
  • Industrial production falls. Industrial production fell 1.4% in February, according to the Federal Reserve, making it four consecutive months of contraction and 10 out of 12. Industrial production is now at its lowest level since 2002. Capacity utilization fell to 70.9% - matching an all time low set in 1982.
  • Housing stays near low. NAHB's Housing Market Index for March came in at 9, unchanged at just one point off its all-time low, and in line with consensus. Prospective buyers fell to 9 from 11. Home sales over the next six months are unchanged at 15.

Earnings: Monday After Close

  • Sina (SINA): Q4 EPS of $0.49 beats by $0.04. Revenue of $101.5M (+43.6%) vs. $99.4M. (PR)

Today's Markets

  • Asia markets were mostly higher Tuesday, with Tokyo leading the way up for a second day. Nikkei +3.128% to 7,419. Hang Seng -0.76% to 12,878. Shanghai +3.02% to 2,218. BSE -0.89% to 8,864.
  • In Europe, markets opened down and have yet to regain breakeven. London -0.3%. Paris -0.8%. Frankfurt -0.2%.
  • Stock futures are marginally higher. Dow +0.3% to 7203. S&P +0.3% to 756.50. Nasdaq +0.3%. Crude +1% to $47.81. Gold -0.05% to $921.90.

Tuesday's Economic Calendar

Seeking Alpha editor Eli Hoffmann contributed to this post.

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