Deutsche Bank downgraded China Netcom (NYSE:CN) to Hold from Buy, according toBriefing.com. The news services also reports that Citigroup downgraded McDermott (NYSE:MDR) to Hold from Buy.
Citigroup (NYSE:C) was cut to Underperform from Neutral at Merrill Lynch, according to24/7 Wall St. The financial website also reports that Goldman Sachs (NYSE:GS) was cut to Underperform from Buy at Merrill Lynch.
TheStreet.com's Jim Cramer says struggling banks can be shorted to oblivion now that the rules won't be enforced.
Memo to the FDIC: Watch your back. The SEC just flipped its allegiance to the bad guys, the guys who want to break not just certain banks, but your bank! That's right, with the scrapping of the emergency rule that eliminated naked shorting, where you don't have to find the stock, and with the end of the vigilance against bear raiding, the SEC may have just caused a run at the FDIC.
I had hoped that the SEC would see that these financials have been manipulated to unreasonable levels, making the confidence in all institutions so low that nobody wanted to give them money. The rule change -- which when you think of it, wasn't much of a rule change as much as an enforcement of the way things are supposed to be, where you actually have to find the stock you sold short first so you don't fail to deliver -- worked!
It gave the system some breathing room. I think the rule change might have saved Merrill Lynch (NYSE: MER) (Cramer's Take) from being shorted into oblivion so it couldn't have done its deal. Lehman (NYSE: LEH) (Cramer's Take) didn't do a deal, those bad boys be back on the griddle now for unknown European exposure. AIG (NYSE: AIG) (Cramer's Take) wasn't protected in the first place and I believe will need to raise $10 billion to $15 billion in the teens to cover its European exposure. Now there's little hope at all for Fannie (NYSE: FNM) (Cramer's Take) or Freddie (NYSE: FRE) (Cramer's Take), as their stocks will be blitzed into oblivion and Hank Paulson will have to start the planning of cash infusions as opposed to what he said last Sunday -- why did he say that, for heaven's sake? Maybe he's too close to John "We don't need capital" Thain from their Goldman (NYSE: GS) (Cramer's Take) days.
This post is one in a series on prominent company nicknames. See all 25, and share your thoughts and memories about Golden Slacks below in the comments.
There are many corporate nicknames that are used to either make fun of, shorten, or parody certain company names. But the nickname of "Golden Slacks" for Goldman Sachs Group Inc. (NYSE: GS) is perhaps the most appropriately assigned nickname in all of corporate America.
With the exception of a few years, and with the exception of 2007/2008 woes, investment bankers and brokers and traders on Wall Street have done far better financially than most jobs on Main Street. Goldman Sachs bankers are thought of as being the highest paid on Wall Street.
There are bucket shops, small single-office brokerage firms, small regional firms, larger second-tier brokerage and investment banking firms, and the prized bulge-bracket firms. Goldman Sachs defines the bulge-bracket firm on an exponential basis, although in some ways it is almost like a club. You can't just walk into an office with a few grand to open an account. Goldman may not have official minimums, but the thought has prevailed that if you don't have at least $5 million at the firm then you shouldn't expect your broker to call you.
Today was somewhat tiring -- there was no real direction and the media was competing for any broad stories with meat to them. Selling picked up at the end of the day and broke a three-day run. The US trade deficit came in narrower than expected and oil prices came down another $1.00+ to well under $114 per barrel. While there was more negative news in financial stocks, today's drumming may have been more analyst driven than on other days where large drops were seen. As you will see, bond yields came down sharply today.
Here are today's unofficial closing bell levels: DJIA 11,642.47 (-1.19%) S&P500 1,289.59 (-1.20%) NASDAQ 2.430.61 (-0.38%) 10 YR T-Note 3.918% (-0.08%) Top Analyst Upgrades Top Analyst Downgrades
Apple Inc. (NASDAQ: AAPL) rose on two separate analyst calls. It was started as "Outperform" in news coverage at Credit Suisse and Lehman Brothers also reiterated an "Outperform" rating. Shares were up almost 25 at $176.48 in today's final minutes.
Capstone Turbine Corp. (NASDAQ: CPST) managed to rack up gains despite fears over cautious earnings. The company had a single order that accounted for this and racked up another gain to its backlog. Shares were up 7.5% at $2.61 in today's final minutes. Here are the Q&A comments from the conference call.
CNNMoney notes that Morgan Stanley said it would offer to repurchase all ARS "held by individuals, charities and small and medium-sized business with accounts of $10 million or less at the bank." Morgan Stanley will begin to start buying back $4.5 billion worth of ARS on September 30th and will "make its best effort to provide liquidity solutions" for institutional investors by the end of 2009. But New York attorney general Andrew Cuomo is not satisfied with Morgan Stanley's proposal.
Meanwhile, the list of big ARS issuers that have not settled grows shorter. Here are six holdouts (with their 2007 municipal ARS issuance in parentheses):
JP Morgan upgraded AMR (NYSE: AMR), Continental (NYSE: CAL), and US Air (NYSE: LCC) to Overweight from Underweight, according toBriefing.com. The news service also writes that Deutsche Bank downgraded Goldman Sachs (NYSE: GS) to Hold from Buy.
After nearly six months of stalemate, things are finally starting to happen for holders of Auction Rate Securities (ARS) -- the $330 billion of long-term debt whose yield used to reset in weekly auctions. This morning, The Boston Globe reports that UBS AG (NYSE: UBS) is poised to announce that it will redeem $19.4 billion worth of ARS and pay $150 million in fines, split between Massachusetts and New York. UBS follows Citigroup, Inc. (NYSE: C) and Merrill Lynch & Co., Inc. (NYSE: MER), which yesterday announced plans to redeem over $17 billion worth of ARS.
Why should you care? If you have money frozen in these securities, the reason is obvious. If not, what's happening here suggests three lessons for investors:
Don't buy without knowing. Before you buy anything a broker is trying to sell you, read the prospectus, find out how the broker will be compensated for the sale, and if you don't understand what you're buying, don't buy it. Many people bought based on broker pitches that ARSs were cash equivalents, highly liquid, and yielded slightly more than money market funds. It turns out that ARS auctions started failing publicly last September.
If your money becomes illiquid, make alot of noise. ARS investors contacted government officials and the media in an organized way. The public attention led to investigations by legal officials. That attention uncovered UBS e-mails demonstrating that brokerage firms decided to dump the toxic waste from their own books to the accounts of their individual customers -- even as their executives dumped the securities from their own portfolios.
The Oracle of Omaha is shining a light on the presidential campaign of Barack Obama.
According to media reports, Warren Buffett is participating with Obama in a meeting about the economy along with Google Inc. (NASDAQ: GOOG) Chairman Eric Schmidt, former Treasury Secretaries Robert Rubin and Larry Summers and former Labor Secretary Bob Reich, according to CNBC. New Jersey Gov. Jon Corzine, a former Goldman Sachs Group Inc. (NYSE: GS) co-chairman, and former Federal Reserve Chairman Paul Volcker also will be at the meeting of the wisemen tomorrow. Buffett will be participating via telephone hook-up.
There is plenty to talk about given the current state of the economy and the housing market which the International Monetary Fund says shows no signs of recovery. Obama, the junior senator from Illinois, is clearly signaling not to expect much from the meeting.
``I expect some further fine-tuning of short-term policies based on what's happened over the last several months,'' Obama said in an interview with Bloomberg News.
What that means is not clear. It should surprise no one that Buffett is backing Obama. The investor has been critical of President Bush's economic policies including the repeal of the estate tax which he said would be a "terrible mistake." But that doesn't mean he agrees with all of Obama's policies either.
As CNBC notes, Buffett supported Hillary Clinton while she was running for president and disagrees with Obama's call to tax the windfall profits of oil companies and his decision to forgo public financing of his campaign. I guess the Omaha investor considers Obama to be a significant improvement over Republican John McCain.
Interesting how the greatest investor in history who Republicans tout as a champion of capitalism is as big of a Democrat as Barbra Streisand.
Does America really need an economy that depends on creating new bubbles to get us out of the mess caused by the bursting of old ones? Is it possible to replace this with an economic system that generates growth without bubbles? I think the answers to these questions are No and Yes.
The most recent example of this bubble economy is the way the dot-com frenzy's aftermath was replaced by a debt bubble, which was focused heavily on a now-imploding mortgage-backed securities (MBS) industry. The dot-com bubble expanded thanks to the public's insatiable appetite for dot-com IPOs, regardless of whether the issuer was or could become profitable. The MBS bubble grew thanks to rock-bottom interest rates, rising housing prices and institutional investor demand for higher "risk-free" yields, all of which ignored the cost of a market reversal.
But the MBS part of the current bubble may not be the last to burst. There are also the leveraged loans that fueled a boom in private equity -- a market which has lost 70% of its business in the last year. Thankfully, massive defaults in such loans have yet to occur. The New York Times reports that capital-starved banks are starting to limit commercial and industrial loans that fuel normal business expansion. It reports that such loans have dropped 3% since 2007, from $3.36 trillion to $3.27 trillion.
Goldman Sachs (NYSE:GS) has raised $10 billion to invest in existing LBO loans. According to the FT, the investment house plans to make money by "taking advantage of a gap in the financing markets created by the credit crisis." In other words, Goldman believes that the problems in the lending market have driven leveraged buy-out loans below their logical values. Panic has created opportunity.
While the news may be good for banks that hold some of these loans and do not want to write them off if they fail, Goldman is making a bet beyond the fact that LBO loans may be selling at a discount now. Goldman is essentially betting the economy will get better in the fairly near-term.
For many of these loans to perform well, the economy has to avoid a deep recession. Even loans with reasonable credit ratings, debt in companies with strong prospects and earnings, could fail if the general business conditions deteriorate into a prolonged period of negative growth. Under such circumstances, Goldman could pick relatively safe debt and still get burned.
Someone at Goldman sees light at the end of the economic tunnel.
Douglas A. McIntyre is an editor at 247wallst.com.
The Wall Street Journal's Walter Mossberg said in the "Personal Technology" column that he cannot recommend Apple Inc's (NASDAQ: AAPL) MobileMe, as it has "too many flaws to keep its promises".
The Wall Street Journal also speculated that the collapse this week of SemGroup LP, which is the parent of SemGroup Energy Partners LP (NASDAQ: SGLP), may have played a role in the 14% drop in crude oil over the past 10 days.
In a move that could take advantage of the gap in the financing markets, The Goldman Sachs Group Inc (NYSE: GS) raised $10B to invest in loans backing leveraged buyouts. The fund will reportedly buy senior loans, the Financial Times reported.
OTHER PAPERS:
Former American International Group Inc (NYSE: AIG) chief Hank Greenberg is reportedly in settlement talks with New York Attorney General Andrew Cuomo over charges that Greenberg improperly inflated corporate books to show improved profits, the New York Post said.
People with the matter said that Ken Wilson, The Goldman Sachs Group Inc's (NYSE: GS) most senior financial-institutions broker, will temporarily exit the firm, the Wall Street Journal reported, in an effort to advise Treasury Secretary Henry Paulson on how to resolve the country's banking crisis.
The American Federation of State, County, and Municipal Employees, a union with a stake in Citigroup Incorporated (NYSE: C) called for the financial services company to break itself up. The Financial Times reported that the demand will almost definitely be rejected by Citigroup.
OTHER PAPERS:
Treasury Secretary Henry Paulson's plan for rescuing Federal National Mortgage Association (NYSE: FNM) -- Fannie Mae -- and Federal Home Loan Mortgage Corporation (NYSE: FRE) -- Freddie Mac -- calls for the creation of a new regulatory agency that would seek to assert more stringent control over the banks and lessen the damage they could cause to the American financial system, the New York Times reported.
The Daily Telegraph reported that BP Plc (NYSE: BP) blocked a $1.8B dividend payment to its Russian partners in the TNK-BP joint venture.
WEB SITES:
According to paidContent.org, now that its cash on hand exceeds its market cap, speculation that Napster Inc (NASDAQ: NAPS) could be a takeover target heated up.
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.
This post is one in a series on prominent company nicknames. 
Today was somewhat tiring -- there was no real direction and the media was competing for any broad stories with meat to them. Selling picked up at the end of the day and broke a three-day run. The US trade deficit came in narrower than expected and oil prices came down another $1.00+ to well under $114 per barrel. While there was more negative news in financial stocks, today's drumming may have been more analyst driven than on other days where large drops were seen. As you will see, bond yields came down sharply today.
After nearly six months of stalemate, things are finally starting to happen for holders of Auction Rate Securities (ARS) -- the $330 billion of long-term debt whose yield used to reset in weekly auctions. This morning, 
The Oracle of Omaha is shining a light on the presidential campaign of Barack Obama.
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Slow approach to raising bank capital loses the race against write-offs
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How Fannie and Freddie will fail
