$$$ Deals: Trash Is on Top of the Heap
In our M&A Roundup for the week ended June 29, big Allied Waste sale to Republic Services leads to a doubling of deal volume, although private equity recedes. [CFO.com]

$$$ Merrill concerns reignite Bloomberg speculation [MarketWatch]

$$$ Daniel James [WallStrip]

Yahoo filed its preliminary proxy statement today in an effort to win over its shareholders for the upcoming August 1st board meeting,

Within its 32 pages, the presentation outlines: 1) the failed Microsoft acquisition and why Microsoft was inconsistent, 2) the downside of a partial search agreement with Microsoft, 3) the benefits of the Google partnership, 4) Yahoo's plan for the future, and 5) also makes a case that Carl Icahn hurts the performances of companies he has recently been involved with and that his board slate is not the answer.

Yahoo cites two separate occasions (May 17 and June 8), where they asked Microsoft if they wanted a full company acquisition, and Microsoft said no. Additionally, Yahoo believes that the partial search agreement does not benefit the company "financially or strategically and is based on flawed assumptions."

The claim that Microsoft was "unresponsive and inconsistent," with regards to making a deal is rather accurate. We are well aware of the see-sawing of Ballmer and Co. as they kept switching positions on the deal. The presentation gives a nice overview of the timeline of events on page 8.

Yahoo addresses each aspect of the hybrid search deal with Microsoft, concluding that it does not improve cash flow and cedes too much control. The $1 billion upfront is taxable and Yahoo believes that Microsoft's cost savings and revenue benefits are far too optimistic and unrealistic. They also make the claim that they are unprotected competitively at the end of the ten year search agreement.

The plan for the future is discussed starting on page 17 of the presentation. Yahoo believes that its unique assets, like its content properties, Yahoo! News, Sports, and Finance, make it a "must buy" for advertisers. They want to better position themselves to link search and display together, and the presentation also mentions cloud computing, the next step towards "Web 3.0."

The recent reorganization within Yahoo's management ranks is their effort to support these core strategies.

By far the most interesting part of the presentation is Yahoo's attack on Carl Icahn, charted out on page 28. Take a look; there are a lot more red arrows than green ones. Yahoo makes the case that Icahn has hurt shareholders of companies he has been involved with in the past year, as stock prices have plunged. At the same time, is it Carl who is hurting the price or is it the company that is battling him and underperforming?

It will be interesting to see Icahn's response to Yahoo playing offense here. On Friday, he indicated he would comment on Yahoo and its management. So far, the only update on his blog today is his responses to a few commenters' remarks regarding his previous rants on corporate America.

You can take a look at the full presentation here.

-- Yacrosoft correspondent Travis

August Busch IV, the 43-year-old CEO of Anheuser-Busch, announced his counterattack against InBev's now-hostile offer during a Friday conference call with investors and analysts. Kaiser August pitched an expansion of Anheuser's cost-cutting program, Blue Ocean, to make $1 billion in cuts by 2010, twice its original target and including job buyouts or layoffs for up to 1300 employees, or 15% of Anheuser's workforce. "We need to break from a conservative culture," the young Kaiser reported, but gave no word on whether shareholders also needed to break from conservative management.

Busch argued that Anheuser's current management "can achieve independently" the value of InBev's bid and has planned the cuts for some time. Setting aside skepticism about the timing and originality of the plan, he has his work cut out for him in convincing shareholders that Anheuser can trim its fat more efficiently than InBev. Busch contends that an already-entrenched management team can deliver better results because of their familiarity with the terrain; previous attempts by conservative, family-controlled enterprises in similar situations have had mixed results at best. Carlos Brito, by contrast, speaks of "unleashing that to the world" when he refers to Budweiser, capturing the hyper-aggressive national spirit of the Belgians.

August IV initially said that InBev could remove all the directors at will, but asked at the end of the call, "Can we correct my statement" before announcing that Anheuser would challenge this point in Delaware's Chancery Court. Chances for peace look slim; one beverage consultant remarked "InBev is a very aggressive company. They don't take no for an answer."

-senior Anheuser-Habsburg-Busch correspondent Andrew

Whether you're looking for employment or just ass in the vicinity of Grand Central, take note: a male temp'ing tipster informs us that "there are high grade women to be found in Barclays' investment bank." And no, we did not send one of our interns to a temp agency so that he might sample the offerings at the various banks around town for your benefit, though now that I mention it, that's not such a bad idea.

I don't know how many of you had signed up to hear Erin Callan's "insights on both the mitigation of risk during volatile market conditions as well as the outlook for Lehman and the industry" tonight at 6:15 but FYI, the event has been cancelled.

What transpired in the 4 hours since Count Vikula hacked into our system and shut this place down?

-- Massage enthusiast Jeffrey Epstein pleaded guilty to paying underage girls to awkwardly stand by while he jerked off into a towel. He was sentenced to 18 months in prison, plus a year of house arrest, and will be given the official title of sex offender. Adding insult to injury is the news that he will definitely not have the scratch to take up with the prosts, at least not with the same vigor, following the hard time. Epstein lost $57 million as "Major Investor No.1" in the Bear Stearns hedge funds.

-- Vanity Fair/Bear blamed CNBC, where "there is simply no adult supervision," for BSC going down, and also claimed that a group of hedge fund managers celebrated the collapse at a breakfast the following Sunday morning during which they "planned a similar assault on Lehman" for the following week BUT FAILED TO TELL US WHAT THEY ATE.

-- We received cloak and dagger emails from a few of you about "something happening at Lehman."

-- Carney, as one of you guessed, staged a Free Epstein rally, topless, while I watched one of the best "It's Always Sunny In Philadelphia" episodes ever, "Charlie Wants An Abortion." If you haven't seen it, stop what you're doing and rectify that now. My favorite part is this little bit of dialogue (looking for a clip) between Mac and Meg, a pro-lifer he's trying to bed, at an abortion clinic protest:

We're still going through the Vanity Fair article on Bear which blames, among others, Citadel, SAC Capital, and Goldman Sachs for bringing down the 85 year-old firm. But before we start pointing fingers, let's take a second to note the one party writer Bryan Burrough doesn't think had a hand in blowing the place to smithereens. And in fact, if I may be so bold as to read between the lines, seems to applaud for coming to BSC's rescue, albeit too late.

So where do Wall Street's movers and shakers spend their summers? Everyone knows that the Hamptons is a favorite. Private equity billionaires Henry Kravis and Pete Peterson have places on the east end of Long Island, as do George Soros and oil heir David Koch. Other bold-face names (at least, Wall Street bold-face names) include Mary Meeker, the Morgan Stanley stock analyst, short-seller Jim Chanos and Citigroup executive Sallie Krawcheck.

But what about other summer getaways popular with Wall Street executives? Forbes has a rundown today of who summers in Aspen, Sun Valley, Connecticut's Litchfield and Nantucket.

Citi CEO Vikram Pandit sent out a memo congratulating the troops on completing the second quarter last night; not successfully, per se, just in general. I'm paraphrasing but something like "It's June 30 and we're still here," which you have to admit is an accomplishment worth highlighting. He then went on note that while big C has "the right Strategy, Structure, and Talent," rather conveniently, "none of that matters." The only thing that matters, Count Vikula wrote, "is our Culture-- our heritage, our people," and preserving the legacy of Citi now, so that when this thing goes down (and see me about placing bets later), it'll be gone but not forgotten. To that end, Vik would like you to take a few hours or weeks to write down your favorite memories of Citi. Do you think fondly of the gazillions in writedowns C's taken in the last couple days? Or would you like to get more personal, and perhaps discuss the 40 lashings you received after getting caught napping at the desk, post new motto? No story is too meaningless. And while sharing it probably won't make Citi "the best company in the world," as Count Vikula jokes later in the memo, or even profitable, it will be a big waste of your time. And that's what this is all about, isn't it?

So how did Wall Street convince all those corporate treasurers to invest the cash holdings of their companies in disastrous auction rate securities? A new study shows that more than 85 percent thought that Wall Street firms would bail out the market if it failed, according to this morning's Financial Times.

Nearly 70 per cent of corporate treasurers who bought auction-rate securities said dealer support was implied. A full 17 per cent of the treasurers said that they were "told explicitly that the investment bank would ensure that the auctions would not fail."

For years, the firms selling auction rate securities did support the market by buying excess securities, guaranteeing the auctions would not fail. When scrambling to increase balance sheet capital earlier this year, nearly every firm on Wall Street that had sold the products decided to let the auctions fail. Since then issuers have been forced to bail out those securities paying the highest interest rates, while investors with those paying the lowest interest rates have simply been unable to access their funds.

Auction-rate securities 'implied support' [Financial Times]

Phil Gramm gave his first political interview in years to Stephen Moore in the Wall Street Journal's weekend edition. The interview is clearly meant to reassure conservative voters about Republican presidential candidate John McCain. What separates McCain from Obama, Moore writes, is that although neither of them know much about economics, "McCain has the good sense to know where to turn to for first-rate advice."

Gramm was something of a hero to a lot of conservative activists. He cut his teeth as a Reagan Democrat in the House of Representatives, championing Ronald Reagan's tax cuts in the early eighties. Later he switched allegiances to the Republican party and got elected to the Senate. With the GOP victories in 1994, Gramm became the chairman of the powerful banking committee. Moore writes that he played a "decisive role in nearly every fiscal conservative victory in the 1980s and 1990s."

But that was then and this is now. Gramm is now 65 years old, and he vanished from the political stage six years ago when he took a high-rolling investment banking job at UBS. So what does Gramm offer voters now?

Don't Forget the Middle People (NYT)
Wherever you go, it's always about the middle class. In the election, you rarely hear talk about the actual, real poor. Maybe you fight vaguely against poverty or something, but that's about it. It's all middle class all the time. Seems that even in Hollywood, where the actors are mulling a strike, they're making their complaints about the industry's "middle class". And they got the NYT to explain how third tier actors are having a tough go of it these days, for all sorts of reasons. Some will sound really familiar: like outsourcing voiceover work overseas. Then there's the attack on cheap, substitute goods: too much reality TV programming!

Falling Prices Grip Major Stock Markets Around the World (NYT)
Great news: world markets are just as bad as the US ones. That's great in the sense that we shouldn't feel too bad about slipping back into bear market territories after one of the worst June's of all time. Also good news: June is almost over, so we can get back to starting to go up again.

Property Insurers Confront Rising Catastrophe Losses (WSJ)
All this flooding in the midwest: what's it costing the insurers? Recent catastrophe claims are totaling $5 billion, and total for the year stand at 8.9 billion which is close to the entire loss for 2007. It could pretty much guarantee that the industry sees an underwriting loss for the year, though perhaps that not in the bag just yet.

Volatility Drops Most Since 2001 as Dollar Fall Slows (Bloomberg)
Everytime oil spikes another $5, you hear a lot of fretting about the continued decline in the dollar. But apparently that's really slowing down. One index of currency volatility has dropped severely as the pace of the dollar's declines have slowed. Anyway, the point this article is trying to make is that the deceleration of the dollar's decline may avoid severe forms of intervention, such as government's stepping in and buying or selling.

$$$ Roses Aren't Green for Bulls [Portfolio]

$$$ More Bear Stearns Indictments Ahead? [NPR]

$$$ Natus Medical, Inc. (BABY) [WallStrip]

The sky is falling. And it's raining shares of almost every company on the Dow all the way down into the storm gutter. Maybe it's time you started looking for a new job. We spent part of the afternoon combing through our Career Center in search of the most interesting jobs. There are dozens to choose from, all categorized according to specialization. But today we thought maybe our friends over at Lehman Brothers could use a little extra help. So here's our Job of The Week.

If you are worried that Lehman might be repeating the same mistakes as last time, as in re-upping their leverage ratio, then perhaps you could lend a hand and apply to be a VP in their Global Equity Risk Management team. The fraternal order of Lehman wants identify, report, monitor and analyze key market risks. Don't make them try to do this on their own anymore.

Earlier this week, Angelo Mozilo told Countrywide shareholders that Bank of America will "reap the benefits of what we have sowed." At the time, this was the greatest veiled threat we had ever heard. This morning, Citi CEO Vikram Pandit one-upped His Orangeness. And just to make sure everyone saw it (the one-upping of Moz and the actual threat itself) Lil' Vik stuck the the thing in an op-ed for the Journal (it's like he's playing to us, isn't it?).

In the U.S., we recently saw the unprecedented opening of the Federal Reserve discount window to nonbanks. By definition, unprecedented events set a precedent. And regardless of whether that window is officially opened or closed, the market now assumes that it will be open if necessary on an ad hoc basis.-- Vikram Pandit

Below are subsequent graphs that were excised by the Citi PR department:

Worn out by another ugly week in the markets? Don't worry, you still have time to sign up for BeachComber, DealBreaker's summertime email-only special newsletter. Even if you missed the first edition last week, by now you've probably heard DealBreaker launched a weekly newsletter focused on escaping work and engaging in leisure, especially in the Hamptons. Every Friday afternoon we'll update you on the expected weather, traffic and parties you'll be encountering in the East Egg of the twenty-first century. We might throw in a couple of links to business stories too.

The second edition of BeachComber will published over email in a few minutes. Sign up below by simply entering your email address. It's free!

(Also, if there's anything you'd like to see--such as league tables for nightclubs, Further Lane party invitation origami--let us know. We'll be happy to oblige.)

Yesterday the fixed income group at Lehman gathered in an auditorium at their midtown headquarters for a "town hall meeting," according to two people who attended the meeting. Most of the meeting was filled with the kind of rah-rah talk that has become common on Wall Street as firms try to boost morale amid layoffs and loss-making quarters. But one bullet point on the presentation stuck out to those at the meeting. It asked a simple question: "How Are We Going To Get Paid?"

It's an important question at Lehman Brothers. Historically, the compensation expenses at Lehman Brothers has varied by a few decimal points around 50% of net revenues. And although Lehman's compensation ratio has typically been higher than it's Wall Street rivals, it's now at historically unprecedented--and financially unsustainable--levels. Lehman paid out $2.3 billion in the second quarter of this year, up from $1.8 billion for the same period last year. Revenues, as everyone knows, went into negative territory, with Lehman booking a negative $700 million.

At the end of the meeting one of the attendees pointed out that the bullet point question about how Lehman will be able to pay it's employees was never really answered.

MER London is said to have laid off 20 percent of its first years today. Three months severance, no bonus. Makes five minutes in Citi's JO&C'ing room look pretty good, doesn't it?

Last year, Merrill Lynch's John Thain was the highest paid chief executive at a public company in the North East corridor stretching from Washington DC to Boston, according to the Associated Press.

Thain took over as CEO and chairman of Merrill in December, after record-breaking losses forced Stan O'Neal out of the corner office. According to the AP study, Thain took home $83 million in salary, bonus, benefits and perks last year. Although Thain only joined Merrill Lynch in December and was paid a base salary of $57,000, his compensation was boosted by a $15 million cash signing bonus, plus restricted stock and stock options, that Merrill paid to him when he agreed to leave the New York Stock Exchange. Much of that compensation, however, is tied up in incentive pay that Thain won't be able to access for several years. And those options won't do him much good if Merrill's stock price doesn't recover.

Lloyd Blankfein, the chief of Goldman Sachs, and Morgan Stanley's John Mack also made the list of top earner. The rest of the list is after the jump.

Citi first-years got numbers this morning and they're "so bad" that everyone's been granted a ten minute nap under their desk plus five minutes of alone time in the "jerk off and cry" room. 1st tier got 65, 2nd got 53, 3rd got 25. Our tipster was unsure about the remaing two levels though we've got our guesses. Fourth tier's prize is one of those gigantic coupon books. Fifth tier's prize is you're fired.

Bonuses at LEH are down 100 percent.

Wachovia bonuses came out today and apparently they are down 50 percent (top first year analysts got 90k in 2007).

But this time it's serious. 'Member those sweet limited edition BSC playing cards we told you about the other day? Commemorating Ace Greenberg's March 8, 1999 50th anniversary with the firm? Bearing his face and money shot of the trademark bowtie? Ringing any bells? Anyway, it was the absolute best piece of Bear memorabilia on the auction block, second only to the wiccan CEO's Little Book Of Magic. Which is why some twerp (who outbid us) put up $61 in exchange for the deck. Now, however, said twerp informs us that the seller "is MIA, and hence we can't complete the deal. He/she was also selling a Bear Stearns football, which we also bid on and won. Needless to say we are more than mildly annoyed at not having our hands on these."

Earlier: Highest Bidder Will Also Receive 2 20-Minute Magic Lessons, On The House

JP Morgan Chase didn't waste much time stripping the name Bear Stearns off of the building at 383 Madison. And now they are "leveling" the prices at the cafeteria to make the prices match those at JP Morgan. But we need details! What's going up in price? What's going down? Are the hamburgers now subprime?

Microsoft Seeks Path Beyond the Gates Legacy (NYT)
Today is Bill Gates last day as a full-time employee of Microsoft, so all week there's been plenty of writing about what it means. We have no idea what it means. He'll still be the Chairman of Microsoft, so realistically, expect to see the words "Bill Gates" and "Microsoft" together a lot, even if he doesn't draw a bi-monthly salary. If we were gates, we'd start a web startup. That'd really shock the hell out of everyone You know, go out, hire a team, raise $500k in seed money. Get the fire back. He's only in his 50s, so this whole retirement/philanthropy thing seems a little early, no?

Oil climbs to record above $141 in Asia (AP)
We're still like $60 away from $200 oil, but it's really in the bag, isn't it? When is someone going to come out with that oil $300 note? And when is the economy going to grind to a standing stop as has been promised.

Global Oil-Supply Worries Fuel Debate in Saudi Arabia (WSJ)
After the clock hits 12:00 today, and you start going into slack mode for the weekend, you might want to check out this front pager in WSJ, about two Saudi oil execs on opposite sides of the peak oil debate. Seriously, so much of this debate has been cold, theoretical and, well, geological. Finally, a human face or two.

FriendFinder Networks IPO delayed as developers mutiny (ValleyWag)
This is some pure rumormongering from ValleyWag, which is fine, cause they put it in their 'RumorMonger' category, and besides, without rumors there wouldn't be news. Anyway, we've been excited about the 'FriendFinder' IPO, cause it's actually the Penthouse IPO. And we've been lusting after that S-1 since we first heard that it might get filed. What are their margins? We can't wait to find out!?. Anyway, apparently things aren't going great operationally, though ValleyWag extrapolates and predicts problems with the IPO, which looks like a bit of a leap, unless we're missing something.

Oil costs force P&G to rethink supply network (FT)
Story we've been hearing more and more about: logistics operations getting redesigned to be less reliant on cross-global transport. Quick! Someone needs to write an "End of Globalization" book. Not that there aren't already a million books that basically have that name.

Anheuser-Busch's board called InBev's offer "financially inadequate" after markets closed today, ending two weeks of silence with a unanimous rejection for Carlos Brito's company. The Belgian/Brazilian brewer had already fired the first hostile shot across the bow of Anheuser, announcing this afternoon that they filed suit in Delaware to confirm that Anheuser's entire board of directors can be removed without cause.

While the Journal's David Kesmodel undersells the fireworks to come by referring to the "possible takeover battle" looming, his colleague Heidi Moore is more helpful: "the charm offensive is over and InBev is ready for war." Moore describes Brito as "the diplomatic, silent assassin of deal making," the suave Brazilian counterpart to Steve Ballmer's portrayal of Maxwell Smart (or FEMA). The belligerent language throughout Moore's article is particularly entertaining since instead of being the victim, it's the Belgian company that is pouncing on an unprepared and largely defenseless target.

$$$ Rumors Of HSBC Buying UBS Scare Connecticut [Greenwich Time]

$$$ An epic Bill Gates e-mail rant [SeattlePi]

$$$ TimTV 2.0 [TimSykes]

$$$ Interactive Investment Banking League Tables

Bank of America announced this afternoon that three percent of its employees will indeed "reap the benefits of what [Countrywide] has sowed." About 7,500 jobs will be eliminated over the next two years, beginning in the third quarter.

Bank of America to cut 7,500 jobs [Reuters]

Today, Yahoo announced their fourth reorganization in the past 18 months, creating three new teams that will report to President Sue Decker in an effort to centralize upper management and perhaps placate shareholders angry at Decker and Yang for recent missteps.

Ash Patel is moving from the Platforms & Infrastructure group to lead an audience products division, while Hilary Schneider from the Global Partner Solutions group will be in charge of the newly created US regional division. Additionally, an insights strategy team was created, although Yahoo has yet to name its leader.

Kara Swisher at All Things Digital reports that a new idea is being pushed by dissident Yahoo investors, who now want Microsoft to buy one-third of Yahoo at $30-$32 a share. Carl Icahn is rumored to be one of those investors backing the idea.

If this plan does come to fruition and Microsoft is able to gain control, Yahoo will be forced to pay $250 million to Google for backing out of their search deal.

-- Yacrosoft correspondent Travis

Late last year, an 18,000 square foot Bridgehampton house suffered the humiliation of foreclosure, an indignity that's supposed to be reserved for Ed McMansions in California. Adding insult to injury is the news that the home, which features 8 bedrooms, 9 ½ baths, a pond, elevator and "flower-cutting room," all set on 4-acres, has just seen its asking price reduced from $27 million to $19.5 million. The only thing that could possibly make this sad situation even worse is if Lenny Dykstra is able to successfully sell his Thousand Oaks home for the delusional price of $24,950,000 (i.e. 33% more than what he bought it for less than a year ago) before this place goes (which might actually happen, considering Nails is throwing in some deal-clinching extras, such as his "Discarded Dips of Distinction," a collection of chewing tobacco from the great moments of one illustrious career, tastefully encased in a white gold-flecked display case). The silver linging? John Paulson, now shorting the individual mortgages of down-on-luck friends in the Hamptons, is going to make a killing on this one.

$19.5 Million Hamptons Mansion In Foreclosure [WSJ]

Mozilo, his dark bronze skin contrasting sharply with his white hair and shirt...

Earlier: JPMBSPNC? Stearns Morgan Mutual? Bearpont Morgan Banc?

Countrywide CEO Angelo Mozilo nearly started crying at the last CFC shareholder meeting. The salty discharge was overshadowed, comedy-wise, however, by the Moz's promise-- and he actually said this-- that Bank of America "will reap the benefits of what we have sowed." If that is not the greatest veiled threat EVER uttered, I don't know what is. And you know he wanted to continue with something like, say, "Those suckers don't even have a clue what they're in for. Seriously, the long-term effects, merely taking lawsuits into account, will be not unlike having a scalding hot poker violently inserted where the sun don't shine. [pauses for effect] They might as well have bought an asbestos company. In fact? Probably would've been better off doing so. Honestly, though, this deal is like getting a very expensive answer to the question, 'what does it feel like to be ass-raped for an eternity?' [shakes head at the thought] Anway, I see we have leaf cookies today, is that new? Man, I'm going to miss this shit."

At Countrywide's End, an Emotional CEO [BusinessWeek]

As we reported earlier today, CEO August Busch IV and his board plan to turn down InBev's $65/share bid for Anheuser-Busch. The Budweiser brewer, which has ignored the offer for the past two weeks, will formally reject the courtship of Carlos Brito while announcing its own strategic plan.

Anheuser-Busch will cut at least $500 million in costs, largely in marketing, and is considering the sale of its Busch Gardens parks. The cuts to be proposed will largely mirror those planned by InBev, and Busch will have to make a tough but critical sell since Anheuser has practically no takeover defenses.

Warren Buffett, whose 4.9% stake in Anheuser is larger than the Busch family's, chatted with Becky Quick yesterday to deny reports that he had an opinion about the merger, let alone that he had met with August Busch in St. Louis. Buffett remains publicly an agnostic about the offer, calling the upcoming fight "an interesting spectator sport."

August Busch earlier made a proposal to acquire Modelo Group as a means to make Anheuser too big for InBev to swallow. Anheuser already owns a majority of the Mexican brewer behind swill-grade Corona, but the controlling stake is in the hands of Antonino Fernandez, the ninety -year-old patriarch whose family runs Modelo. Modelo has reportedly refused any talk of surrendering control and has twisted the knife by talking with InBev behind Bud's back; American news reports have shifted their description of Modelo from "Mexican partner" to "fiercely nationalistic."

Matt Blunt, governor of Missouri, and both of the state's senators have made a bipartisan plea for an antitrust review to block the sale. DealBreaker's on-site research at Anheuser's St. Louis brewery discovered that Budweiser gained its light-tasting rice-and-barley mix from World War I rationing. While this exonerates Anheuser from the charge of chintzing out on the mix, it further discredits the merits of political meddling in beer and lets us blame Woodrow Wilson for the sorry state of American lager.

-Negra Modelo aficionado Andrew

I've got some upsetting news to share: a bunch of white collar criminals in-training have suffered a serious setback, their dreams of one day ripping off other people for sport and possibly--if cards were played correctly-- serving time, shattered to pieces.

Goldman Sachs cut its second quarter earning estimates for Citigroup and Merrill Lynch today, predicting that the banks will incur $8.9 billion and $4.2 billion in writedowns, respectively, earning them a place on Goldman's "conviction sell" list. Way more important recommendation not included in analyst William Tanoma's formal note, but reported by CNBC's Darren Rovell to an in-denial Erin Burnett just now? "Conviction sell on the purple cow." That is right, suck it Williams.

Citigroup, Merrill Estimates Lowered by Analysts [Bloomberg]

Despite having just changed the name on the front door of 383 Madison to reflect the newly formed JPMorgan Cayne, Jamie Dimon is said to be itching for one more big buy, having not yet conquered his substance abuse problem. Supposedly of interest to the JPM CEO are Washington Mutual and SunTrust and, to a lesser extent, PNC Bank, Wachovia, and US Bancorp, for reasons that include concern about future access to the Fed's discount window and a kinky desire to have virtually no white space left on his business card. The Post said it was unclear if there've been any "formal discussions" regarding an acquisition, or merely "casual CEO-level dialogues," along the lines of "Hey, what if we bought you?" "Hah, that'd be funny" "Yeah, it would" "Yeah...you wanna go bowling?" "Yeah, two shakes."

Earlier: Bearpont Morgovia?

Call It JPMor-Gan [NYP]

We've written a lot about how Ralph Cioffi and Matthew Tannin seem to have had the misfortune of being assigned the role of fall guys for the collapse of Bear Stearns, an event in which they arguably played a minor and peripheral role. But this morning a report from National Public Radio reveals that it is far worse than that. The Feds wanted to arrest some Wall Street guys at the same time they announced the prosecutions of a bunch of mortgage originators. They were intent on arresting the guys, not letting them surrender, and perp-walking them for the photo-op. Even worse, they targeted the Bear guys because the fact that the firm had already collapsed meant the arrests wouldn't roil the market.

Justice isn't blind. It's watching the markets.

How the Bear Stearns Fraud Case Unfolded [NPR]

The consensus at a meeting in Saudi Arabia over the past weekend linked the you-deserve-what-you-get wisdom of the bestselling and thoroughly obnoxious book The Secret with the rise in oil prices. OPEC basically told Americans and Brits that all their whiney Doomsday speak paired with US dollar woes, rather than a production shortage was to blame for the spike in crude costs.

The meeting, which hosted top oil producers and heads of state (including British heart-throb Gordon Brown), was held at the bikini-deficient port town of Jeddah and was a chance for Saudi royals to show they truly give a shit about the state of the world's light, sweet crude while sharing in favorite pastimes such as reclining and drinking coffee.

Despite hippy-dippy appeals to stop talking about it so much, the Saudis agreed to appease our oil-grubbing fingers, and pledged to increase output by a paltry 200,000 barrels a day (barely enough for our riding mower).

--by Senior Middle East correspondent Jessica Olien.

Federal prosecutors are investing whether Ralph Cioffi and Matthew Tannin misled not only investors but also their lenders and counterparties.

BusinessWeek reports that Ben Campbell's office, the Brooklyn-based Eastern District, is considering further charges against the two former Bear Stearns hedge fund managers, who currently face both criminal and civil charges.

Anheuser to Reject InBev Offer (NYT)
Not surprising: The great American, hero of a legend of a company Anheuser-Busch plans to formally reject a buyout offer from an invading, European company that wants to rob our beer making heritage. Seriously, let's step back. Of all the buyouts to get huffy about, this has to be the silliest. C'mon: They're a beer company. Beer is for getting people smashed and then they do stupid stuff. Not that we're above that, but to get all red-white-and-blue over it really just plain silly. Plus, good news: the beer isn't going away. They're not going to keep it from us. Related: we recently had a Budweiser in a bottle shaped like a bowling pin. Awesome!?

Tribune Co. may sell buildings to pay off debt (Newsday)
As the business has deteriorated faster than he expected, Sam Zell, CEO and owner of Tribune, has been forced to shed assets faster than he might've liked. So far it's mainly been papers, though he's selling the Chicago Cubs, too. And he might sell the Tribune Tower next. It's dicey. On the one hand, if he is making a bet on the future of newspapers (in some form) then he can't keep selling off papers. On the other hand, assets like the Cubs and the headquarters are probably the company's only assets that aren't spiraling downard in value.

Adelphia founder and son's prison terms cut (Reuters)
A small morsel of good news for the Rigases, the father and son pair from cable firm Adelphi spending years in the cooler. Both got a couple years shaved off their sentences after a conviction of one of their counts was overturned. But they're both still looking at years in jail, so it's small solace. Too bad they're not alcoholics (as far as we know), since we've heard that you can get another year shaved off for entering a treatment program for that in prison.

He Drives This Game-Show Vehicle (WSJ)
! Like everyone else we know, we're pretty much addicted to Cash Cab, the show where you get picked up by a cab and answer trivia questions for money along the ride. And like almost everyone we know, we haven't ever had a chance to go on the show, but we want to. Anyway, WSJ takes a look at the show and its host, comedian Ben Bailey. One interesting factoid: Bailey actually has a taxi license. That's cool. But we're still a little skeptical of the show's premise that riders have totally no idea what they're about to get into. Yes, yes, it claims it, but the whole thing is too well staged to work out so perfectly. But we haven't yet cracked the nut on that one, and this article offers us no help. Commenters?

$$$ Putting Out Efficiency [LoSC]

$$$ Jim Chanos's new spread [Observer]

$$$ James Hong [WallStrip]

Paul Kedrosky sparked a heated debate when he suggested we shouldn't trust analysts who don't own the stocks they rate as "buys" or short their "sells." Evan Newmark at DealJournal chimed in with a similar thought: "A better way to instill investor confidence in analyst picks would be for them to bet their own money, either pro or con." Felix Salmon bucks the trend today by arguing that (1) analysts are irrelevant because institutional investors ignore analysts' buy/sell recommendations, (2) owning or being short the stocks would introduce bias into analysis and (3) analysts aren't any good at picking stocks, so encouraging them to own their picks wouldn't improve things.

We're still outside observers in this debate but we notice that Felix's first and last points might be ameliorated by analysts buying and selling in accordance with their picks. Institutional investors might be more inclined to follow stock picks of analysts if they knew the analysts were incentivized to pick correctly because they had skin in the came. And analysts might get better if they stood to gain and lose based on the quality of their picks.

The guy who started all this, Kedrosky, has a much longer response here.

With a share price that has reached as low as $3.35 recently, it is probably too late to short severely troubled electronics chain Circuit City.

However, those who are stuck with shares of this rapidly declining company are surely looking to the heavens above and davening for a sale.

Investor Mark Wattles, founder of Hollywood Video and owner of a 6.5% stake in Circuit City, is one of those praying. He has taken recent steps that have allowed him to successfully install three of his five nominees to the board of directors. Wattles has claimed that there is one interested party in buying the chain and that an announcement will be made "within four weeks."

The God-I-Daven-To^TM, aka Carl Icahn, backed Blockbuster when it offered $6 a share to buy the company in April. However, at first, Circuit City rebuffed attempts. Under intense criticism and pressure from shareholders in recent weeks, management has finally allowed Blockbuster to examine its finances and has also hired Goldman Sachs to help it explore a sale.

Carl, blog update please?

--Senior electronics correspondent Travis

Eliot Spitzer can't get a break. Not only did the top New York court give him the smackdown to his case against Grasso today, now he's being blamed for unsafe sex. We didn't read this conversation between the dirty girl at Jezebel and the dirty girl at NY Intel all that closely (it's maybe unsafe for work), but we're pretty sure it means that Eliot Spitzer is to blame for New Yorkers avoiding condoms. There's a nice analogy for the phrase "When France sneezes, all of Europe catches cold" but we'll leave it to you to spell it out.

Bonus: They say they've got the secret to Spitzer's "dangerous" kink.