The heads of Bear Stearns and Lehman Brothers (NYSE: LEH) say that Goldman Sachs (NYSE: GS) did them dirty. According toThe Wall Street Journal, "the big securities firm has come under suspicion, at least from the chiefs of two rivals who have questioned in recent months whether Goldman, even indirectly, might have put pressure on their firms' stocks."
As would be expected, Goldman said "no way."
So far, no definitive evidence has surfaced that Goldman did anything wrong. More to the point is the issue of why it would bother. Both Bear Stearns and Lehman are substantially smaller than Goldman, the premier investment bank in the world. It would have very little to gain by damaging such small rivals.
But as it always true when large companies are charged with taking illegal actions against competition, the most important cause to suspect is stupidity. If anyone at Goldman took the risk of acting to harm the two smaller brokerages, it was simply because they did not have the sense that their creator gave them.
Douglas A. McIntyre is an editor at 247wallst.com.
Sun Microsystems (NASDAQ: JAVA) shares are trading nearly 8% higher in premarket action after announcing earnings forecast that was better analysts had expected.
Seagate (NYSE: STX) shares, however, dropped over 9% in after-hours trading Tuesday, after it forecast first quarter earnings below Street's estimates.
Sprint Nextel (NYSE: S) saw its shares jump 9.44% Tuesday. Reports say that SK Telecom is in talks with Sprint over potential deals.
Cleveland-Cliffs (NYSE: CLF) said it's going to buy Alpha Natural (NYSE: ANR) for $10 billion in cash and stock, putting a 35% premium on Alpha's stock. ANR shares are trading 27% higher in premarket action. CLF's, 4.5% lower.
People familiar with the issue said that European regulators are gearing up to file new antitrust charges against Intel Corporation (NASDAQ: INTC). The charges, the Wall Street Journal reported, would allege Intel gave major European retailers an incentive not to sell computers that use Advanced Micro Devices Inc (NYSE: AMD) chips.
OTHER PAPERS:
The New York Times reported that News Corporation's (NYSE: NWS) New York Post and The Daily News, owned by Mortimer Zuckerman, are exploring a print pact and have been in talks to find ways to combine some business functions of the papers, according to people briefed on the matter.
Three people familiar with the matter said that the SEC subpoenaed Wall Street investment banks including The Goldman Sachs Group Inc (NYSE: GS), Deutsche Bank AG (NYSE: DB) and Merrill Lynch & Co Inc (NYSE: MER) in its hunt and crack down on suspected manipulation of Bear Stearns and Lehman Brothers Holdings Inc (NYSE: LEH) shares. Bloomberg reported that two of the people said the SEC, which yesterday curtailed short selling in financial stocks, is looking for e-mails and trading records and is also examining whether securities firms have "adequate controls" to deal properly with misconduct.
The SEC is trying to stop Wall Street players from spreading rumors that sink stocks, as I posted yesterday. The reason such rumors matter is because there are many companies that are unable to defend themselves from rumors. Bear Stearns comes to mind as an example. I think if someone tried to spread a rumor that Goldman Sachs Group (NYSE: GS) or Berkshire Hathaway Inc. (NYSE: BRK.A) were heading for bankruptcy, the rumor would not get foo far.
But if a company lacks such a strong reputation, its CEO needs to be prepared to respond effectively to such rumors. And I really don't think it should be difficult to mount an effective defense. In my mind, the CEO should be able to provide credible answers to two questions:
Cash flow. How large are the company's short- and medium-term liabilities and how many times do the market value of its short- and medium-term assets cover these liabilities?
Debt default. What are the company's key loan terms and what specific assurance can the company provide that it is in compliance with these terms?
Want to know how bad it is? Apple Inc. (NASDAQ: AAPL) shares are down on the day the geeks around the world are waiting in line for the new iPhone, which has gotten rave reviews. Amazing. If people are looking for an excuse to buy Apple, this may be it.
Wachovia (NYSE: WB) was able to get a real star to be its new CEO. Robert Steel was once a vice chairman at Goldman Sachs (NYSE: GS) and is currently Treasury Undersecretary. He joins the big bank just in time to see its fortune get worse, perhaps much worse.
At the time Mr. Steel comes through the door at the firm, it also said it would lose as much as $2.8 million in the second quarter, which is much greater than Wall Street expectations.
According toThe Wall Street Journal, "The naming of a new CEO may quiet market speculation that Wachovia is an acquisition target."
The question is why anyone would want the Wachovia job. The company's shares are down more than 70% in the last year. The drop is even greater than Citigroup's (NYSE:C).
Mr. Steel is likely to cause an uprising among his shareholders within his first few weeks on the job. Wachovia will probably need to raise more money to shore up its capital base. Its market cap is down to $28 billion. If the firm has to raise $5 billion, the stock could fall from its current price of $14.29 to below $11. A worsening housing market and economy will probably cause even more write-offs as the year goes on.
Steel should have stayed in Washington. The chances that things will get better at Wachovia soon are slim and none.
Douglas A. McIntyre is an editor at 247wallst.com.
The Financial Times reported that Bain Capital, The Blackstone Group LP (NYSE: BX) and General Electric Company's (NYSE: GE) NBC universal will acquire The Weather Channel properties from Landmark Communications for approximately $3.2B in a leveraged buy-out. The Weather Channel will be run separately.
A top Goldman Sachs Group Inc (NYSE: GS) trader is defecting to GLG Partners Inc (NYSE: GLG), the UK's second-largest hedge fund. Goldman's Driss Ben-Brahim, a partner in the firm and the head of its emerging market trading business, will take over GLG's $1.2B emerging markets special situations fund, the Financial Times reported.
OTHER PAPERS:
Take-Two Interactive Software Inc (NASDAQ: TTWO), which makes video games, will probably sign video game creator Ken Levine to a new contract. The deal would bolster Take Two's argument that its value exceeds the $25.74 per share that Electronic Arts Inc (NASDAQ: ERTS) has offered as a takeover price for the company, The New York Post believes.
Liquidnet Holdings Inc, which got is start in the dot-com heyday of the late 1990s, has filed to go public.
Essentially, Liquidnet facilitates large equity trades for institutional investors – which are anonymous. In fact, the platform allows access to about 7.5 billion shares per day of liquidity.
No doubt, the company is putting pressure on the traditional exchanges and yes, is growing at a rapid clip. From 2005 to 2007, revenues spiked from $161.8 million to $346.5 million. Net income was a juicy $191.2 million last year. To keep up the growth, Liquidnet wants to expand aggressively into foreign markets, where things are still in the early stages.
In the first half of 2008, the S&P 500 fell 12%. June's stock market was the worst since 1930. So are stocks now a screaming buy or are they poised to plunge further? Nobody knows. But my guess is that stocks will move based on how well they perform compared with expectations. And the risk of negative surprises in most industries exceeds the chance of positive ones. So stocks will probably keep falling.
Here's a quick review of six negatives:
Oil prices. With oil at $142, up 492% since January 2001, consumers are paying about $4.10 a gallon for gas and companies that use oil are getting squeezed while trying to raise prices. An attack on Iran, a big oil supplier, looms on the horizon. This and other geopolitical uncertainties could put further pressure on oil.
Housing. Three million people are expected to face foreclosure on their homes. And prices have dropped 15%. Since people were using home equity to finance their purchasing, their negative equity is sucking the wind out of the economy.
Six months of 2008 are now behind us and the stock market has not been a friendly place to most investors. Stability that was once found in household names that were industry giants is gone, and they have now been brought to their knees.
Many of them were the stocks we might have looked to in the past for stability, so you can be sure I put forward my five candidates with a little trepidation, but forward I go anyway. First a little review is in order.
Citigroup Inc. (NYSE: C) dropped from around $53 per share last year to around $30 in January and we can buy it today for around $17. Even at that price Goldman Sachs (NYSE: GS) has downgraded it to a sell and thinks there is more bad news to come. Citigroup was the largest bank in the world. Not any more.
General Motors (NYSE: GM) was the largest car maker in the world. That was before the stock tumbled from $43 to its current $11 range. A crushing blow to long time investors hoping that someone in the company could stop the ship from sinking.
Like many other financial institutions, investors are worried about the viability of CIT Group Inc. (NYSE: CIT), which is a major business lender. Of course, the stock price has plunged – and there are many rumors swirling.
But today, there was some good news. That is, CIT has struck $1.8 billion in deals to unload its manufactured housing/home loan units. The stock is up 16% to $7.93.
There were actually two buyers. First, private equity firm Lone Star Funds agreed to a $1.5 billion transaction for the home lending division. Next, Vanderbilt Mortgage and Finance will spend $300 million for the manufactured home segment.
These deals are certainly a big relief. Basically, CIT can now focus on its core business – and not deal with the headaches of the consumer area.
Actually, CIT has some big-time backing. For example, Goldman Sachs (NYSE: GS) recently made a $3 billion infusion.
Yet, there are still many challenges. After all, CIT has had difficulties generating profits and the credit crunch isn't going away.
It was only last week that Goldman Sachs (NYSE: GS) caused havoc in the stock market (or at least lead the charge) downgrading Citigroup Inc.(NYSE: C), and General Motors (NYSE: GM) among others, but now they have started to express concern that some of the defense sector stocks may be vulnerable to the next president's ax.
It was only a few weeks ago I posted Chasing Value: General Dynamics & Raytheon: The defense does not rest and things continued to look bright until a few days later, perhaps after the GS behind the scenes warning started to have an impact on the market that the sector took a mysterious swoon -- now I know why.
If Goldman Sachs, one of the few investment houses with any credibility left, makes a move everyone else seems to want to get out of the way.
I have viewed the defense sector favorably this year and will not abandon ship because GS is getting cold feet. They have been rather negative on everything lately and I do not think the (stock) world is coming to an end.
The Bloomberg article notes that while some programs will be cut others will be added. It is all a guessing game as either presidential candidate will want to review the entirety of defense expenditures in a new administration.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of GD.
U.S. futures were mixed to lower early Friday morning, a day after stock markets sold off, ending at their lowest level in nearly two years. Still, with oil prices reaching another record in Asia, it's questionable whether stocks could indeed stage a recovery.
On Thursday, U.S. stocks sank to lows not seen in nearly two years after Goldman Sachs (NYSE: GS) downgraded investment banks including Citigroup (NYSE: C) and General Motors Corp. (NYSE: GM) to Sell and as Wall Street was also worried about the outlook for tech stocks as both RIM (NASDAQ: RIMM) and Oracle (NASDAQ: ORCL) reported quarterly results Wednesday, giving a tepid outlook. Topping it all were oil prices reaching $140 a barrel. The Dow Jones Industrial Average fell 358 points, or 3.03%, the S&P 500 lost 38 points, or 2.94%, and the Nasdaq Composite dropped 79 points, or 3.33%.
Usually, a day after such a selloff, buyers tend to come in, this morning we also woke up to news that oil prices climbed to a record above $141 a barrel in Asian trading, which may dampen the mood on Wall Street again. Light, sweet crude for August delivery rose as high as $141.71 a barrel before pulling back to $141.10. The previous trading record for a front-month contract was $139.89, set on June 16.
GM stock closed yesterday at $12.81 but today traded down to a new 52-week low of $11.21; as of 1:15, it is at $11.51, down nearly 10%.
GM is trading at a 30 year low. "Today's drop came after a Goldman Sachs analyst cut his rating for GM to "Sell" from "Neutral" and his price target to $11 from $16, saying things could still get worse for the North American automotive industry as a whole."
I wonder if he read my post yesterday . . . probably not. I am not a big fan of analysts as a group but this did not take a crystal ball. Barron's should do a follow-up story explaining how their crystal ball got so fogged up.
MOST NOTEWORTHY: The U.S. Brokers sector, Goldman Sachs and Research in Motion were today's noteworthy downgrades:
Goldman downgraded U.S. Brokers to Neutral from Attractive since they can not find a catalyst to move the group significantly higher over the next few months given the continued deterioration in fundamentals. Goldman added Citigroup (NYSE:C) to their Conviction Sell List as they expect additional write-downs of $8.9B in Q2 and see the potential for additional capital raises. Goldman lowered their target price on Citigroup shares to $16 and recommends a pair trade of long Morgan Stanley (NYSE:MS), short Citigroup.
Wachovia downgraded Goldman Sachs (NYSE:GS) shares to Market Perform from Outperform on renewed economic fears, a likely slower pace of substantial capital raises, seasonally slower prime brokerage, and valuation.
Research in Motion (NASDAQ:RIMM) was cut to Market Perform from Outperform at JMP Securities following the weaker-than-expected Q1 report and guidance and lowered FY09 EPS estimates on increased spending.
OTHER DOWNGRADES:
Red Hat (NYSE:RHT) was downgraded to Market Weight from Overweight at Thomas Weisel.
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In the first half of 2008, the S&P 500 fell 12%. June's stock market was the worst since 1930. So are stocks now a screaming buy or are they poised to plunge further? Nobody knows. But my guess is that stocks will move based on how well they perform compared with expectations. And the risk of negative surprises in most industries exceeds the chance of positive ones. So stocks will probably keep falling.
Six months of 2008 are now behind us and the stock market has not been a friendly place to most investors. Stability that was once found in household names that were industry giants is gone, and they have now been brought to their knees. 
Like many other financial institutions, investors are worried about the viability of 
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Comfort Zone Investing: Exploit volatility with constant dollar investing
Merck earnings preview: No miracles expected
Apple reports Monday -- buy AAPL before earnings?
