Tag Archives: Wall Street Breakfast

Wall Street Breakfast: Must-Know News

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Senate says Apple used Irish subsidiaries to avoid taxes. A Senate report purports to show Apple (AAPL) used three Irish subsidiaries that have no tax residency in either Ireland or the U.S. to avoid paying taxes on some $74B in profits from 2009-2012. Although the practice was legal and is to a certain extent commonplace, the report says AAPL’s scheme was unprecedented in terms of both its complexity and its brashness in the “use of multiple affiliates that had no semblance of a physical presence.” The most glaring example is an Irish affiliate which reported profits of $30B over the period in question but paid no taxes whatsoever. Tim Cook will defend the company (which he says has done nothing wrong) before Congress today.

Cohen, SAC square off with prosecutors. A settlement between SAC Capital and the federal government regarding allegations of insider trading was likely


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Wall Street Breakfast: Must-Know News

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In its quest for cool, Yahoo nabs Tumblr. Yahoo’s (YHOO) board approved the $1.1B acquisition of popular blogging service Tumblr Sunday, the latest step in Marissa Mayer’s quest to give the internet heavyweight a much-needed makeover. AllThingsD notes the deal is indicative of Mayer’s strategy to increase YHOO’s “cool factor” and relevancy with younger audiences. Tumblr, whose founder/CEO David Karp will reportedly stay at YHOO for the foreseeable future, also comes with a treasure trove of user-generated content, something YHOO covets. As for comparisons between Tumblr and YHOO’s ill-fated 1999 acquisition of Geocities, Forbes notes Geocities faltered in part because a flood of ads drove users away; Tumblr seems to be avoiding that pitfall.

Actavis in $8.5B deal for Warner Chilcott. Actavis (ACT) confirmed it will buy Warner Chilcott (WCRX) for $8.5B in a stock for stock transaction Monday morning. The deal will see WCRX


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Wall Street Breakfast: Must-Know News

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Divide grows on asset purchases. Fed officials are increasingly divided over the efficacy and appropriate duration of monthly asset purchases, speeches delivered this week indicate. Complicating matters is economic data which at times seems to convey conflicting messages regarding the health of the nascent recovery. For instance, while the employment landscape may be improving, some of that improvement may be attributable to discouraged workers exiting the labor force. This week, the heads of the Philadelphia, Dallas, and Richmond Federal Reserve Banks all suggested bond buying should be tapered immediately while Boston’s Eric Rosengren maintained his stance in favor of the purchases. Of particular note is San Francisco Fed Chief John Williams, who said the Fed could reduce the pace of asset purchases “perhaps as early as this summer,” assuming conditions remain stable.

J.C. Penney misses, looks forward. "One of our top priorities this year is to


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Wall Street Breakfast: Must-Know News

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Japanese economy grows, but capex is weak. The Japanese economy grew 3.5% (annualized) in Q1 as rising stock prices made consumers more willing to spend, a partial confirmation of the effectiveness of Prime Minister Shinzo Abe’s economic policies. On the other hand, capex fell 0.7% Q/Q on expectations of a 0.7% increase, proof the corporate sector is still skeptical regarding fiscal and monetary authorities’ ability to wrest the country from the grip of deflation. The weak read on business investment weighed on Japanese stocks as the Nikkei fell 0.39% — the index did hold the 15,000 level.

IRS chief’s resignation demanded, received, accepted. Acting IRS chief Steven Miller resigned Wednesday in the wake of the agency’s admission it unfairly screened Tea Party groups seeking tax exempt status from 2010 onward. President Obama called the screening "inexcusable" and emphasized that the IRS was the very last


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French economy slips into recession. France slid into recession during Q1 as the French economy contracted 0.2% Q/Q after shrinking by the same amount in Q4. With unemployment at record levels and President François Hollande’s popularity at all-time lows, the country faces an uphill battle to right the ship as it struggles to bring its deficit in line with the EU-mandated 3%, while simultaneously restoring growth. Economists project a 0.2% contraction for the full year and a survey of French citizens shows just 11% believe Hollande can bring down the jobless rate by year’s end.

CBO slashes deficit estimate. The federal deficit will narrow to $642B in the fiscal year ending in September, the CBO said Tuesday — a meaningful improvement from February’s projection of $845B. The revision comes courtesy of higher tax receipts and dividend payments to the Treasury from Fannie (FNMA.OB) and Freddie (FMCC.OB).


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Loeb pushes for Sony spinoff. Daniel Loeb, whose Third Point Capital has a 6.5% stake in Sony (SNE) worth some $1.1B, is pushing for a spinoff of the company’s entertainment business including the film studio responsible for James Bond blockbuster “Skyfall” and the music label which houses big name artists such as Taylor Swift. Andrew Ross Sorkin says Loeb flew to Tokyo last weekend and hand-delivered a letter to CEO Kazuo Hirai praising the company’s turnaround initiatives but calling for greater focus. In order to “ensure the success” of a potential spinoff, Third Point would be willing to put up $2B to backstop an IPO of around 15-20% of the entertainment arm, the letter said. Other corporate assets Loeb thinks could be ripe for a split include the company’s insurance division.

U.S. oil boom fuels non-OPEC supply growth. Thanks to U.S. shale oil, demand for OPEC


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Dollar rises above ¥100, Nikkei Soars. For the first time since April of 2009, the yen (FXY) fell through the 100-level against the dollar, helping the Nikkei rally nearly 3% on the session and almost 7% on the week. Japanese equities (EWJ) are now trading at levels last seen in January of 2008. Japanese capital flows data finally showed what many had been waiting for since BOJ Governor Kuroda’s shot across the bow at deflation: an outflow, as Japanese investors became net buyers of foreign bonds.

Icahn, Southeastern to bid for Dell. Carl Icahn is partnering with Southeastern Asset to make an alternative bid to acquire Dell (DELL). Icahn and Southeastern will offer shareholders $12/share that can be taken in cash or stock, to go with the option to maintain additional shares in a recapitalized Dell. In a letter to Dell’s board, Icahn/Southeastern effectively


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In surprise move, South Korea cuts rates. In a surprise move, the South Korean central bank cut interest rates by 25 basis points Thursday, calling economic activity in the eurozone and emerging markets “sluggish” and “weaker than initially expected.” The cut took the base rate to 2.5%, its lowest level in two years and when combined with recent fiscal policy designed to bolster growth, should help “accelerate the recovery and increase the upside of Korea’s GDP,” one economist told the NY Times. South Korean stocks (EWY) rose 1.18% and the won fell 0.34% against the dollar.

In China, consumer prices rise, producer price deflation persists. Consumer prices rose 2.4% in China during April, up from 2.1% in March and slightly above economists’ estimates, although still well below the government’s 3.5% target. Producer prices — now in their fourteenth straight month of decline —


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