Opening Bell: 07.21.11 - Dealbreaker

Opening Bell: 07.21.11

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Morgan Stanley Results Beat Estimates (Bloomberg)
Morgan Stanley reported a second-quarter per-share loss that was smaller than analysts estimated as trading revenue increased from the first quarter. The net loss was 38 cents a share, compared with a profit of $1.09 a year earlier, the New York-based company said today in a statement. A $1.7 billion charge tied to the conversion of Mitsubishi UFJ Financial Group Inc.’s preferred stake wiped out earnings for the period. The loss was smaller than the 61-cent average estimate of 18 analysts surveyed by Bloomberg. Net income was $1.19 billion, versus $1.96 billion in the same period of 2010. Trading revenue rose 14 percent from the first quarter, making Morgan Stanley the only major U.S. bank to post an increase. “Morgan Stanley is one of the most interesting stories and has tremendous upside, if they can get the execution right,” Roger Freeman, an analyst at Barclays Capital in New York, said before the results were released. “Some basic execution improvement could drive a lot of the discount to book value away.”

As debt talks intensify, Obama opens door to short-term deal to buy more time (WaPo)
Obama had pledged to veto any short-term measure, but White House spokesman Jay Carney said Wednesday that the president could accept an extension of “a few days” if it allowed a long-term deficit-reduction and debt-ceiling deal to work its way through Congress. The White House concession added to a whirlwind week in which negotiations appeared to be changing daily. At first, leaders were focused on a fallback plan that would raise the debt ceiling but do little to control future borrowing. Then they started considering an ambitious, but complicated, bipartisan strategy for raising taxes and cutting cherished health and retirement programs. By Wednesday evening, as House Speaker John A. Boehner (R-Ohio) and Majority Leader Eric Cantor (R-Va.) huddled with Obama at the White House, aides in both parties said a grand bargain to slice $4 trillion out of the federal budget over the next decade was back on the table.

Wall St. Makes Fallback Plans for Debt Crisis (NYT)
These companies are taking steps to reduce the risk of holding Treasury bonds or angling for ways to make profits from any possible upheaval. And even if a deal is reached in Washington, some in the industry fear that the dickering has already harmed the country’s market credibility.

Fed planning for potential default (Reuters)
Charles Plosser, president of the Philadelphia Federal Reserve Bank, said the U.S. central bank has for the past few months been working closely with Treasury, ironing out what to do if the world's biggest economy runs out of cash on August 2.

Germany and France agree bond buyback plan for Greece, but rule out tax on banks (Telegraph)
Germany and France are willing to allow Greece to slip into a temporary default as part of a bond buyback plan aimed at preventing Europe's debt crisis from spreading, and have ruled out a levy on banks.

McDonald's Customer Throws Ice Cream, Slaps Employees (WFIE)
An unhappy customer sparked a 911 call at the Lincoln Avenue McDonalds in Evansville on Wednesday. Police say employees agreed to keep a woman's ice cream cake in the freezer for her, but she wasn't happy with the condition of the cake when it was returned. Police say the suspect actually slapped the employee after throwing the ice cream at the employee. So far, no arrests have been made in the case.

What Slump? Blackstone Raises $3 Billion for Real Estate Fund (Deal Journal)
Blackstone Group has raised about $3 billion for a new real-estate fund, another sign that the private-equity industry’s dominant players are attracting new capital while many of the smaller funds struggle to attract new money.

Willem Buiter thinks water will be bigger than oil (FT Alphaville)
In a 37-page note on Thursday, the bank’s global strategists recommend investors play the urbanisation trend by buying into water companies (these ones to be specific), arguing that the concentration of the world’s population and increasing standards of life will drive up demand for the liquid commodity.

Twitter Poised to Close a Two-Stage $800M Funding, With Half Used to Cash Out Investors and Employees (All Things D)
Along with basic funding needs, this is largely being done this way to give those with stakes in the San Francisco microblogging company an ability to monetize their privately held common stock and also to do this selling in a more organized — and legal — manner. That is especially important since the company is not likely to go public for at least a year or more. And, while it could also be sold to a bigger company such as Google, that is also not in Twitter’s immediate future.

Layoffs Deepen Gloom (WSJ)
Companies are laying off employees at a level not seen in nearly a year, hobbling the job market and intensifying fears about the pace of the economic recovery.

Rise in UK retail sales fails to allay recovery fears (Telegraph)
The Office for National Statistics said on Thursday sales volumes rose 0.7pc last month, slightly more than analysts had forecast but recovering only half the previous month's drop.

IMF Urges Stronger Yuan, Draws China Criticism (Bloomberg)
The International Monetary Fund said China should let the yuan gain to boost demand and global economic stability, citing the risk that any growth shocks in the country will hurt the world. Currency appreciation combined with reforms to rebalance the Chinese economy “would yield substantial benefits,” the fund said in a statement late yesterday in Washington. A “major disruption in China’s so-far steady growth would have material adverse consequences,” IMF directors said.

Moody's China red flag report under scrutiny by HK regulator (Reuters)
Rating agency Moody's (MCO.N) may face regulatory action in Hong Kong for publishing a report on corporate governance at Chinese companies that sent some of their share and bond prices spiraling.

Atlantis landing ends 30 years of space shuttle flights (USA Today)
As an era comes to a close, nearly 200 satellites, probes and spacecraft have emerged from the cargo bays of NASA's five space shuttles since the Columbia launched from Kennedy Space Center on April 12, 1981…President Obama has charged NASA with finding a way to transport astronauts into deep space, either to Mars or an asteroid, but that flight could be a generation away.

Friend-on-friend swindles increase as economy flounders: Prosecutors (NYP)
"We call these "Affinity frauds," longtime Manhattan frauds prosecutor Micki Shulman told The Post, saying she's seen an uptick in these pal-on-pal swindles as the economy continues to founder. "It's someone saying, 'You can't trust Wall Street, but you can trust me. I'm one of you -- I'm from your church, I'm from your neighborhood, I'm from your same ethnic background," said Shulman, deputy chief of the Manhattan DA's Major Economic Crimes Bureau.

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