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Today's Top News1. Muddy Waters sinks another Chinese stock
Muddy Waters strikes again. The short-selling research outfit based in Hong Kong has long been targeting Chinese companies (many trade as ADRs) that it thinks are overpriced--or are downright fraudulent. The firm created huge headlines last year for its research on Sino Forest, which tanked dramatically after Muddy Waters released a series of reports accusing it of fraud. That led to huge losses by the likes of John Paulson. In its latest research, the firm accuses a company called New Oriental Education of "lying to shareholders about its store growth and financial performance," notes Forbes. The stock of "the largest provider of private education services in China" plunged 30 percent, the lowest since 2007. "This nose dive was preceded by a 34% drop in stock price yesterday after the company revealed that S.E.C was investigating its financial statements. All in all, the stock has depreciated 57% since yesterday morning–this means that the CEO Yu Minhong, a Forbes billionaire with an estimated net worth of $1.05 billion as of March, saw his fortune shrink by at least $330 million in just two days." The report also suggested that the company's auditor at Deloitte might resign. For more: Related articles: Read more about: Hedge Funds, short sellers
2. Bank of America name dropped from arena
You know your brand could use some buffing when the very mention of it makes people nervous, afraid of guilt by association. So it goes with Bank of America. The New York Daily News reports, "Democrats organizing the party's national convention in Charlotte, N.C., seem to have forgotten the name of a key venue. In fundraising messages, the convention host committee has taken to calling the stadium where President Obama will accept the Democratic nomination "Panther Stadium" rather than "Bank of America Stadium." To be sure, the PR crisis that engulfed the North Carolina bank may have crested already. The public passions toward the bank no longer seem quite as intense. JPMorgan seems to have taken the role of top bad-actor bank. Still, we're not yet at the point where entities want to openly associate with the bank. That may not be a bad thing for Bank of America. The elections later this year promise to be exceedingly nasty. Lots of mud is going to be slung about, and perhaps it's a good thing for Bank of America to have its brand put out of the line of fire. Bank of America purchased signage rights to the stadium in 2004. For more: Related articles: Read more about: Bank of America, Brand 3. Morgan Stanley misses estimates
We're now getting a picture of just how much the Moody's 2-notch downgrade of Morgan Stanley's debt really hurt. At the time, the talk was all about how the downgrade could've been worse and how the lead-up to the downgrade action provided ample time for the bank to adjust. But in the end, counterparties turned skittish and reduced their trading with the bank. This hit hard in the second quarter, during which the bank generated 29 cents a share in earnings. Excluding a DVA, profits were just 16 cents a share, well below the roughly 30 cents expected by analysts. The big driver was a nearly 50 percent drop in trading revenue. Fixed income and commodities sales and trading were especially weak. Equity activity was only a bit better. Overall, net revenue fell 24 percent to $6.95 billion from $9.21 billion a year ago. Through June 30, Morgan Stanley posted $2.9 billion of the $6.3 billion in collateral and other payments that counterparties, exchanges and clearing organizations were entitled to call, due largely to the Moody's downgrades. However, collateral calls have slowed recently; the bank has posted $800 million so far in July to bring the total to $3.7 billion. Compensation expenses were $3.6 billion declined from $4.6 billion a year ago. For more: Related articles: Read more about: Morgan Stanley, earnings 4. Stockbroker arrested as a serial window smasher
How do relieve stress if you are a broker with a top flight firm? Michael Steven Poret, 58, a broker at UBS Financial Services in Los Angeles, had an interesting method. He was arrested recently by the LAPD and accused of vandalizing "numerous businesses along Ventura Boulevard and several private homes in Beverly Hills," according to the LATimes. "A witness account and private surveillance footage have depicted the vandal as a graying man in white gloves firing marbles at plate glass windows with a slingshot from the driver's seat of his car, then driving away in no apparent hurry. Authorities believe that Poret could be connected to more than 20 vandalism incidents in Beverly Hills and more than 50 in Encino, as well as several other vandalism reports authorities have received in Van Nuys and Topanga Canyon. The vandal appears to target businesses indiscriminately, hitting coffee shops, an autism treatment center and a salon." Why would a stock broker do this? The leading theory is that he was simply seeking thrills. I guess the brokerage business just wasn't enough excitement. Poret has apparently been a broker at UBS since 2008. One scary question is whether he would have graduated to other, more serious thrills. For more:
Read more about: Stock Broker 5. Lloyd Blankfein eyes his future
Despite endless speculation, no one knows when Goldman Sachs CEO Lloyd Blankfein will choose to step down. I have long maintained that he will likely not step down until he feels assured that he can do so without an asterisk next to his name. That is, he wants to step down at a time when his legacy will not be described as tainted by the financial crisis and the severe fallout for the gilded bank. That day may be inching closer. It would be easy to say that his recent appearance in Washington, where he spoke to the Economic Club of Washington, D.C., was an indication that he's angling for the right public service job. He spoke in favor of Dodd-Frank and said he would not get rid of it, as noted by DealBook. He also urged Congress and the government to avoid fiscal Armageddon. He's sounding very much the statesman. He also found time to squeeze in a White House visit, where he apparently chatted with the President's chief of staff. He has been a rather frequent guest. According to Bloomberg, "Visitor logs show he had been to 1600 Pennsylvania Ave. 15 times, six of those times to meet with the president." He has yet to contribute to either President Obama or Romney. Though his roots are Democratic, he may be hedging his bets. He could be seen in a cabinet-level position at some point. For more: Related articles: Read more about: Goldman Sachs, CEO succession Also Noted
SPOTLIGHT ON... Greenhill's results disappoint Greenhill's stock tanked in the wake of the news that its second quarter profits fell 90 percent, reflecting weakness in advisory business. The results set a negative tone for other boutiques, which will soon release their second quarter results. For better or worse, Greenhill will rise or fall with the M&A market, which remains bleak. That said, there's been a spate of deals recently, and there may be some pent-up demand that will soon be evident. Article Company News: Industry News: And Finally…Implications of the Jeremy Lin move. Article
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Friday, July 20, 2012
| 07.20.12 | Muddy Waters sinks another Chinese stock
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