- Econbrowser blogger James Hamilton details how the Fed earned that $46B profit last year.
- NY Times (NYT) finally looks ready to put its site behind some sort of pay wall. Felix Salmon remains optimistic if it’s implemented correctly, Jeff Jarvis is against it and Barry Graubart is skeptical, although he admits that NYT can’t be blamed for trying.
- Big banks need to be broken up, Rick Boockstaber, senior policy adviser at the SEC, writes on his blog.
- Has the Fed really been buying stock futures since the March rally began? TrimTabs’ Charles Biderman believes the theory is possible, but Barron’s Mike Santoli calls him out. Barry Ritholtz adds his two cents at The Big Picture.
- The Tonight Show drama keeps escalating, but Mark Cuban actually praises NBCU CEO Jeff Zucker for making the bold move to shift Leno to prime time, even though it backfired.
- Insider transactions continue to remain lopsided. “As the recession on Main Street continues, the negative trends in insider buying get even worse,” the Pragmatic Capitalist says.
- GDP may sparkle, but demand still looks dull. “With the huge overhang of existing home inventory and record rental vacancies, and the ongoing repair of household balance sheets, I expect underlying demand to remain weak in 2010,” Bill McrBride writes at Calculated Risk.
- VCs starting to compete directly with M&A market. “Entrepreneurs are waiting longer to take their companies public and that’s a very good thing for everyone,” VC Fred Wilson says. “With the emergence of this new layer of late stage/primary+secondary capital, we can all wait a bit longer. And not sell out. And that’s a very good thing.”
- John Hussman looks at inflation expectations over the next decade. “From a longer-term perspective, however, I believe that inflation will be a major event in the latter part of the coming decade, with the consumer price index roughly doubling over the next ten years,” he says.
- MetLife’s in final negotiations to purchase one of AIG’s biggest international life-insurance units – Alico – for between $14 billion and $15 billion.
US stocks rally, led by healthcare stocks, amid a hotly contested fight in Massachusetts for Ted Kennedy’s Senate seat that could upend the political calculus for just about everything.
DJIA jumps 116 (1.1%) to 10725, S&P 500 rises 14 (1.3%) to 1150, Nasdaq Comp gains 32 (1.4%) to 2320. Every sector gains. Citi posts big 4Q loss, but 2009 proves better than 2008, so there’s something.Kraft finally satisfies its chocolate craving.
But it’s healthcare that leads the way, on hopes that GOP will be able to block healthcare reform bill. Apparently, to Wall Street, even if Scott Brown doesn’t actually win the Senate seat, the fact that the GOP’s put such a big scare into the Democrats — and especially Martha Coakley, who’s taken flak for everything from calling Curt Shilling a Yankee fan to have a Kennedy get her name wrong — is enough to upend the political calculus.
And if he does win, and the Democrats try to rush a final bill to President Obama’s desk before Brown can take his seat, well, that just won’t look very kosher, no matter how they characterize it. This is the downside to trying to push through a healthcare bill, even though there were more pressing matters to attend to.
I’ve long thought the Democratic party pushed healthcare because it knew it had a iron-clad majority to get any bill through, something that might not last past the 2010 midterms elections. As it turns out, it might not last past tonight.
(Correction: an earlier version of this post, as noted by Dow Jones colleague and Red Sox fanatic Geoffrey Rogow, misspelled Curt Shilling’s name. It has been corrected. (Good thing we’re not running for higher office in Massachusetts.))
Similar to JPMorgan’s (JPM) results Friday, Citi’s (C) 4Q results and comments from management today clearly show the US consumer has yet to turn the corner. Maybe not even close.
CEO Vik Pandit said on the conference call, that while there are pockets of improvement around the globe, “U.S. consumer credit remains an issue.”
CFO John Gerspach also admitted that nonperforming assets would’ve climbed “a little bit higher” if Citi hadn’t sold some during the quarter, though he couldn’t immediately say how much higher.
And while they’re hopeful for slight improvement in North American consumer credit portfolios after the first quarter, “the outcome for this second half of 2010 will largely depend on the economy,” Gerspach said.
Literally translated: It’s mostly out of our hands, at this point.
For the consumer, the “economy” means jobs, not GDP. Unless there’s an extraordinary surge of hiring in the next six months — and there’s no signs to suggest that there will be — it’s a stretch to expect much improvement in Citi’s (or JPMorgan’s, for that matter) consumer businesses this year.
Posted by Steven Russolilloon January 19, 2010 Banks, Washington /
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They wanna tax what?!
We’ve been chronicling the latest developments surrounding Obama’s bank tax plan, so yesterday’s NY Times story detailing ways the banking sector can oppose the plan don’t come as a surprise.
Essentially a Wall Street lobbying group is considering a lawsuit against the tax. The Times has the details:
Wall Street’s main lobbying arm has hired a top Supreme Court litigator to study a possible legal battle against a bank tax proposed by the Obama administration, on the theory that it would be unconstitutional, according to three industry officials briefed on the matter…a bank tax might be unconstitutional because it would unfairly single out and penalize big banks, according to these officials…
Administration officials and other legal experts have called those claims dubious.
Indeed, President Obama urged the financial lobby to stand down when he introduced the tax proposal last week: “Instead of sending a phalanx of lobbyists to fight this proposal or employing an army of lawyers and accountants to help evade the fee, I suggest you might want to consider simply meeting your responsibilities.”
Critics of the bank-tax plan argue it would further divide smaller banks, who wouldn’t need to pay the tax, against their larger peers. But the Times says some banks that are against the tax still aren’t sure whether risking a legal battle would be worth it considering the negative connotation surrounding financials these days.
Still, don’t expect the Street to win this battle, Baseline Scenario blogger James Kwak says. Obama’s plan merely amounts to a small tax on banks that enjoy a “too-big-to-fail” subsidy from the government, something these institutions should pay for, he says.
“For political reasons, the administration is trying to dress the tax up as punishment for Wall Street, which begins to sound like a bill of attainder,” Kwak says. “But under the covers, it’s simply sound regulatory policy (though, again, too small).”
So Friday’s selloff is already a distant memory, as the GOP seems poised to smash the Dem’s filibuster-proof majority in the Senate, which could significantly alter the political calculus on a range of subjects, from healthcare to financial reform to fiscal policy. Who know, maybe college football will even get a true playoff system.
Healthcare started the rally, as the election in Massachusetts to fill Ted Kennedy’s Senate seat has more or less turned into a referendum on Obamacare. But it’s spread to every sector since, with telecom, tech and materials all sharply higher. Financials doing well despite Citi’s big, unwieldy earnings report, the bottom line of which was a $7.6B loss.
DJIA up 100, S&P 500 up 12, Nasdaq Comp up 28. Curiously, the dollar is rising as well, which usually spells ill things for equities. But even there, troubles in the euro zone are helping out, as a closely watched gauge of economic expectations in Germany, the ZEW survey, slid for a fourth month. (Addendum: I forgot to mention that Greece’s continuing fiscal issues are adding to the pressure. They are.)
You could almost hear the groans on Friday, as the Dow sank as much as 150 points, even after Intel and JPMorgan posted sharp earnings reports. At the leading edge of a rally that’s in its 11th month, any pullback gets folks to thinking that this is it, the inevitable end that has attended every single rally since, well, since forever. As they say on the Street, nothing goes up in a straight line forever.
But today’s been a complete rebound, albeit apparently based more on the politics of a special election up in Massachusetts than because of any earnings-related stories. And while 4Q earnings are coming up against the easiest comparisons in history — last year’s 4Q, after all, was the first quarter in which the S&P 500′s 500 companies posted a loss — the expectations, some say, still may not be so far out of reach.
“The strong 2010 rally ahead of earnings season has investors wondering if 4Q EPS expectations have gotten too lofty and if companies will be able to beat by enough to keep the rally going,” BofA’s David Bianco writes. “Our view is that 4Q EPS will be impressive, especially at non-financials; and because this quarter is likely to be among a long string of rising quarterly S&P 500 EPS yet ahead, we encourage buying through the season as we expect the S&P 500 to approach 1200 as reporting concludes.”
A short-term correction may lie ahead, Baird’s Bruce Bittles says, but any selloff would be collared around 11oo on the S&P 500, he says. Additionally, while measures of investor sentiment are described as “excessive,” he says they’d need to get “extreme” before any selloff.
Of course, while there is a difference between those two terms, it’s hard to say exactly when the market goes from one to the other.
Apple (AAPL) shares getting a nice boost today after word circulates that it will hold a press conference next week to, presumably, introduce its much-hyped tablet device.
Apple, living up to its reputation, was light on details with its event invitation, only saying “Come see our latest creation.” The event’s scheduled for Jan. 27 in San Francisco.
Apple shares were recently up 4% at $214.02, and are closing in on their 52-week high, which certainly raises the question: How much more tablet-driven run for AAPL shares is left?
Certainly there’s “more room to go,” Kaufman Bros. analyst Shaw Wu says. “I don’t think tablet sales are all baked in yet.” How much higher is a matter of opinion. Wu has a $253 price target on Apple.
But now that the invitations have been sent and it seems almost likely that some sort of tablet will be unveiled at the end of January, MediaMemo blogger Peter Kafka embarks on the next round of speculation: who will jump on Apple’s tablet train?
He compiles a list of media companies that could potentially partner with Apple for its latest device. He believes New York Times (NYT) is “a good bet,” but doesn’t expect much from the big music labels.
Word also comes from WSJ that News Corp.’s (NWS NWSA) HarperCollins is already negotiating with Apple to bring some titles to the tablet. “Presumably other publishers – all of whom are eager for viable Kingle competitors – want in, too,” Kafka says.
As for video, Kafka says Disney (DIS) and its affiliates would be obvious partners.
“In part because (Apple CEO Steve) Jobs is both the company’s largest individual shareholder and a board member,” Kafka says. “But also because Disney CEO Bob Iger has made a point of trying out new digital distribution strategies.”
Posted by Paul Vignaon January 19, 2010 M&A /
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My all-time favorite candy is Cadbury’s creme egg, which comes out around Easter and which I always buy at least two or three of. But if I had to spend four months haggling over the price of them, I’d also have to conclude at some point that something was wrong.
That isn’t what Kraft concluded, making a final push to turn its “hostile” offer for Cadbury into a “friendly” one, the main difference between the two, apparently, being the amount of money offered.
“Kraft and Cadbury are now friends, we’re told. But are they really? Frenemies might be more like it,” the Journal’s Dana Cimilluca writes at The Source. “After more than four months of spirited verbal jousting, during which Cadbury’s brass disparaged everything from Kraft’s products to its management, the two sides have come together to turn a hostile deal ‘friendly.’ ”
First off, on a programming note, we’ve incorporated a Twitter stream into the front page, and we’ve been playing around with different widgets that provide that service, so you may see some movement there in the upper right hand corner. We also, in order to do this, had to start a Twitter account for Market Talk, so if you’re a twitterer, or whatever they call it, you may want to give that a whirl as well.
Now, then, onto more interesting things. Recently, we relayed comments from the Telegraph’s Ambrose Evans-Pritchard about the contraction in money supply, and what it could mean for the global economy. The pertinent paragraph:
The contraction of M3 money in the US and Europeover the last six months will slowly puncture economic recovery as 2010 unfolds, with the time-honoured lag of a year or so. Ben Bernanke will be caught off guard, just as he was in mid-2008 when the Fed drove straight through a red warning light with talk of imminent rate rises – the final error that triggered the implosion of Lehman, AIG, and the Western banking system.
Forget for a second that, officially, the M3 measure in the US doesn’t exist any more (although quite the conspiracy theory was left behind.) John Williams over at Shadow Government Statistics still tracks it, and has it declining. Another group that tracks it is Capital Economics, and the firm says it declined by 1.4% last year, “matching the magnitude of the only previous decline back in 1993.”
It’s wonkish stuff, but it does ground out in the real world. When people say the Fed’s printing money, this is what they’re talking about. The idea behind it is if the central bank buys, say, a trillion and a half worth of assets from the banks, the banks will use the profits to make loans, and people will use the lent money to buy things. The first part happened, but the rest of it hasn’t quite worked out like that.
J.P. Morgan reported some strong earnings today. But what this bloggers eye were some of the sub-numbers in the earnings report. The bank booked $1.8 billion in investment banking fees. But don’t be fooled – that wasn’t from big M&A advising. But $429 million was in advisory fees. Instead, that $1.3 billion + remaining fees […]
David Oreck, founder of a well-known maker of vacuums and air purifiers, says he’s upset his namesake company is in bankruptcy. He says Nashville, Tenn.-based Oreck Corp. was a perfectly profitable company when he sold his stake in it to a private equity firm in 2004. He blames the firm, New York-based American Securities Capital […]
