Morgan Stanley is having a rough year and an even tougher couple of weeks. Forbes writes that as shares of the investment bank sank nearly 8% on the first trading day of the fourth quarter CEO James Gorman sent a memo to employees citing an “an enormous amount of confusion and misinformation” about the bank’s financials.
Reuters picked up the memo from Gorman which reads: “In fragile markets, where fear triumphs over common sense, these things are bound to happen,” Gorman wrote. “It is easy to respond to the rumor of the day, but that is not usually productive.”
What Gorman seems to be referring to are alleged rumors that Morgan’s exposure to troubled European banks with exposure to that continent’s sovereign debt. Information about Morgan’s true exposure to troubled Euro-zone banks is somewhat blurry but the bank’s share price has been even more vulnerable since September 22 when financial blog ZeroHedge said that Morgan Stanley’s entire European bank exposure is 3 times its market cap, and well over its entire book equity value, and that it’s exposure to french banks is 60% greater than its market cap.
Year to date Morgan shares are down 54% and 22% over the last month...
Find out more at http://www.forbes.com/sites/halahtouryalai/2011/10/04/morgan-stanleys-looming-crisis-of-confidence/
Tuesday, October 4, 2011
Monday, October 3, 2011
Raj to judge: I only made $7 million
Get your hankies ready. Convicted hedge-fund felon Raj Rajaratnam is expected to plead before a federal judge today that he doesn’t deserve to be sent to prison for 25 years -- because he only made $7.5 million frin his inside trades, NY Post says. And Rajaratnam didn’t even make a bonus, his legal team noted in court papers.
That’s the argument lawyers for the fallen hedge-fund founder are expected to make today in Manhattan federal court in their last-ditch effort to sidestep the 20-to-25 year prison stretch prosecutors are requesting following his May conviction for securities fraud and insider trading.
The bulk of Team Rajaratnam’s argument is that the 54-year-old founder of Galleon Group didn’t earn the nearly $64 million that prosecutors claim.
And how the judge answers the $64 million question is very important to Rajaratnam. Federal sentencing guidelines state that the larger the crime, the longer the sentence, legal experts say….
Read more at http://www.nypost.com/p/news/business/raj_to_judge_only_made_million_hY2G51s7e4RdbqyDzUpTGO
Wal-Mart: The new Neiman Marcus?
No, we haven't been smoking. Fortune reports: How badly is the tepid economic recovery weighing on U.S. families?
On Monday, Wal-Mart (WMT) Executive Vice President Rosalind Brewer offered sobering insight into the recession's lasting impact on households. Some might call this the so-called "new normal," but Brewer says the downturn has not only changed the way consumers shop but it has also changed the way Wal-Mart has been doing business. Admittedly, Brewer said, the retailer was slow to respond.
"We did not react quickly enough because we thought the recession would turn around a little bit quicker like everyone else," Brewer said on Monday during a panel discussion called "Leading in Tumultuous Times" at Fortune's Most Powerful Women's Summit in Laguna Niguel, Calif.
As talk grows that the U.S. could slip into another recession, here's a glimpse of Wal-Mart's new economic normal and how the retailer has been adjusting….
Read more at http://management.fortune.cnn.com/2011/10/04/walmart-recession/?iid=SF_F_Lead
On Monday, Wal-Mart (WMT) Executive Vice President Rosalind Brewer offered sobering insight into the recession's lasting impact on households. Some might call this the so-called "new normal," but Brewer says the downturn has not only changed the way consumers shop but it has also changed the way Wal-Mart has been doing business. Admittedly, Brewer said, the retailer was slow to respond.
"We did not react quickly enough because we thought the recession would turn around a little bit quicker like everyone else," Brewer said on Monday during a panel discussion called "Leading in Tumultuous Times" at Fortune's Most Powerful Women's Summit in Laguna Niguel, Calif.
As talk grows that the U.S. could slip into another recession, here's a glimpse of Wal-Mart's new economic normal and how the retailer has been adjusting….
Read more at http://management.fortune.cnn.com/2011/10/04/walmart-recession/?iid=SF_F_Lead
Asia Stocks, Commodities Dive on Europe Crisis
Asian stocks and commodities dropped a third day, while regional bond risk jumped to a two-year high, on concern Europe’s debt crisis will worsen. The euro touched the lowest level in more than a decade against the yen.
The MSCI Asia Pacific Index sank 2.1 percent at 2 p.m. in Tokyo, set for its lowest close since July 2009. Standard & Poor’s 500 futures added 0.2 percent after a two-day drop that left the U.S. gauge within 1 percent of levels commonly seen as a bear market. S&P’s GSCI Index of raw materials retreated 0.7 percent, paced by oil and copper. The euro was at 101.24 yen after earlier slumping to 100.76, the weakest since June 2001.
Goldman Sachs Group Inc. cut its global growth forecasts and predicted recessions in Germany and France. European finance ministers meeting yesterday considered “technical revisions” to a July deal for a second Greek bailout, fueling concern bondholders may have to take bigger losses on the nation’s debt. Exporters led losses in Asia after automakers reported weaker- than-forecast North American sales and before data today forecast to show U.S. factory orders stalled….
http://www.bloomberg.com/news/2011-10-04/asia-stocks-oil-drop-on-europe-crisis-concerns-aussie-falls-to-year-low.html
Flowserve, McCormick: Buffett Ready to Lock n Load!
While Warren Buffett’s new favorite investment is Berkshire Hathaway Inc., his almost $50 billion pile of cash may be better spent buying companies from Flowserve Corp. (FLS) to McCormick & Co., Bloomberg reports.
Berkshire is generating more than $1 billion in free cash flow a month, pushing reserves to a record, even as Buffett invests more in equities than at any other time this year. With near zero percent interest rates limiting returns in fixed- income markets, Flowserve, the biggest maker of valves, pumps and seals, McCormick, the largest U.S. spice seller, and 29 other companies are cheaper than Berkshire based on its discount to net assets and meet the takeover criteria in Buffett’s annual letter, according to data compiled by Bloomberg.
The 81-year-old chairman of Omaha, Nebraska-based Berkshire said last week he would repurchase stock for the first time in four decades as long as it sold for less than 1.1 times book value, 29 percent less than its decade-long average. While Oscar Gruss & Son Inc. says the plan may have signaled the world’s most successful investor is finding fewer takeover opportunities after agreeing to spend $9 billion on Lubrizol Corp. in March, the global stock selloff is now making it cheaper for Buffett to find deals, according to Highmark Capital Management Inc.
Find out more http://www.bloomberg.com/news/2011-10-04/flowserve-converges-with-mccormick-as-targets-using-buffett-math-real-m-a.html
Berkshire is generating more than $1 billion in free cash flow a month, pushing reserves to a record, even as Buffett invests more in equities than at any other time this year. With near zero percent interest rates limiting returns in fixed- income markets, Flowserve, the biggest maker of valves, pumps and seals, McCormick, the largest U.S. spice seller, and 29 other companies are cheaper than Berkshire based on its discount to net assets and meet the takeover criteria in Buffett’s annual letter, according to data compiled by Bloomberg.
The 81-year-old chairman of Omaha, Nebraska-based Berkshire said last week he would repurchase stock for the first time in four decades as long as it sold for less than 1.1 times book value, 29 percent less than its decade-long average. While Oscar Gruss & Son Inc. says the plan may have signaled the world’s most successful investor is finding fewer takeover opportunities after agreeing to spend $9 billion on Lubrizol Corp. in March, the global stock selloff is now making it cheaper for Buffett to find deals, according to Highmark Capital Management Inc.
Find out more http://www.bloomberg.com/news/2011-10-04/flowserve-converges-with-mccormick-as-targets-using-buffett-math-real-m-a.html
A new Lost Decade is leading to (gasp!) revolution
Marketwatch’s Paul B. Farrell writes: Memo to the Super Rich, your high-paid lobbyists and your no-compromise political puppets whose sole mission is destroying the presidency: Yes, you are succeeding. You’re also killing the economy.Thanks to your self-destructive ideology, America is now in the second of back-to-back Lost Decades. A new one on the heels of the 2000-2010 Lost Decade where Wall Street lost more than 20% inflation-adjusted. Get it? You guys launched America’s second Lost Decade of 21st century.
Yes, two consecutive job-killing Lost Decades. The first created by Wall Street’s obsessive greed. The new one triggered by the widening wealth gap that’s feeding endless partisan political wars powered by Super Rich conservatives hell-bent on re-establishing the same free-market, trickle-down Reaganomics policies that have been sabotaging America for the last generation.
Unfortunately, the new one gets worse: Why? The coming Lost Decade is a backdrop for a wave of class warfare destined to trigger a historic revolution in American politics, bigger than the ‘29 Crash and Great Depression.
Initially inspired by the Arab Spring, Occupy Wall Street is a virus spreading rapidly as Occupy Everything, a reform movement that will overshadow the GOP/Tea Party as the voice of the people, leading to an Occupy America.
Why is this crucial for investors? Because these class wars are guaranteed to deepen America’s market and economic problems during the coming Lost Decade. So listen closely…
http://www.marketwatch.com/story/a-new-lost-decade-is-leading-to-revolution-2011-10-04?mod=MWCommentaryandBlogs&mod=marketwatch
Yes, two consecutive job-killing Lost Decades. The first created by Wall Street’s obsessive greed. The new one triggered by the widening wealth gap that’s feeding endless partisan political wars powered by Super Rich conservatives hell-bent on re-establishing the same free-market, trickle-down Reaganomics policies that have been sabotaging America for the last generation.
Unfortunately, the new one gets worse: Why? The coming Lost Decade is a backdrop for a wave of class warfare destined to trigger a historic revolution in American politics, bigger than the ‘29 Crash and Great Depression.
Initially inspired by the Arab Spring, Occupy Wall Street is a virus spreading rapidly as Occupy Everything, a reform movement that will overshadow the GOP/Tea Party as the voice of the people, leading to an Occupy America.
Why is this crucial for investors? Because these class wars are guaranteed to deepen America’s market and economic problems during the coming Lost Decade. So listen closely…
http://www.marketwatch.com/story/a-new-lost-decade-is-leading-to-revolution-2011-10-04?mod=MWCommentaryandBlogs&mod=marketwatch
Bonuses This Year Are Going To Be A Disaster
Bank bonuses this year are going to be ugly, according to Businessinsider. Dodd Frank rules, plummeting bank stocks, and a poor global economic outlook all translate to a poor outlook on banker bonuses.
At Bank of America, bonuses will be down 40-50%, according to a BofA exec who spoke to Charlie Gasparino.
They also look bad at Goldman, where according to The Australian:
[The firm made ] an internal commitment to ensure that no more than 35% to 45% of its revenue is paid to staff — a lower proportion than any other Wall Street bank.
And at all banks, a good portion of the bonuses paid to staff are perpetually losing value, because most bonuses are now awarded in bank stock... which keeps plummeting…
Read more: http://www.businessinsider.com/bank-bonuses-2011#ixzz1ZmtO2Xsl
At Bank of America, bonuses will be down 40-50%, according to a BofA exec who spoke to Charlie Gasparino.
They also look bad at Goldman, where according to The Australian:
[The firm made ] an internal commitment to ensure that no more than 35% to 45% of its revenue is paid to staff — a lower proportion than any other Wall Street bank.
And at all banks, a good portion of the bonuses paid to staff are perpetually losing value, because most bonuses are now awarded in bank stock... which keeps plummeting…
Read more: http://www.businessinsider.com/bank-bonuses-2011#ixzz1ZmtO2Xsl
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