Money world

Shares of Morgan Stanley, Goldman Sachs Group Inc and France’s Societe Generale tumbled on Tuesday on speculation that the banks might be caught on the wrong side of a trade involving German automaker Volkswagen AG.

Goldman declined to comment, but people inside the company said it had no Volkswagen losses. Morgan Stanley spokesman Mark Lake said that company has no exposure to the automaker. SocGen could not immediately be reached, but earlier Tuesday said it was sticking with its third-quarter earnings forecast.

Speculation that banks were caught in a “short squeeze” involving Volkswagen fanned worries about the industry’s ability to weather a credit crisis that has led to the demise of several large financial companies and has prompted government interventions worldwide to avert a financial system collapse.

In afternoon trading, Morgan Stanley shares were down $1.54, or 11.2 percent, at $12.19, while Goldman fell $4.49, or 4.8 percent, to $88.39. The cost to insure both companies’ debt against default rose.

SocGen shares were down 4.67 euros, or 12.3 percent, at 33.34 euros, and were the second-largest percentage decliner on France’s benchmark CAC-40 index, Reuters data show. Credit Agricole SA fell 13.4 percent.

“There have been several ‘black swan’ events occurring in the markets, and there are concerns that they will lead to large losses,” said James Ellman, president of Seacliff Capital. “Black Swan” events are considered hard to predict and sometimes appear to have elements of randomness.

Volkswagen on Tuesday briefly became the world’s largest company by market value, following weekend news that Porsche Automobil Holding SE had taken a stake of more than 74 percent after buying much of the floating stock.

This meant that fewer shares were available for trading, and prompted a short squeeze, forcing investors who had bet on a decline in VW shares to buy the stock 1 hour cash loans. Volkswagen shares soared 425 euros or 81.7 percent to 945 euros; at one point they touched 1,005.01.

“Somebody out there was incredibly short, and they had their you-know-what handed to them,” said Walter Todd, a portfolio manager at Greenwood Capital Associates LLC in Greenwood, South Carolina, which invests $1 billion.

An equity derivatives strategist who asked not to be named said many large market participants might have been caught because of the large number of shares Porsche took on.

Concern about Morgan Stanley were already elevated after Mitsubishi UFJ Financial Group Inc this week said it would raise up to $10.6 billion to replenish a depleted capital base. The bank is Japan’s largest, and recently spent $9 billion on a 21 percent stake in Morgan Stanley.

David Trone, an analyst at Fox-Pitt Kelton, said Morgan Stanley shares may also face downward pressure stemming from “problematic ’self-fulfilling fear.’”

“Like peers that have either gone bankrupt or were forced to sell, we believe fundamentals were sound enough to overcome problem asset exposures, but there is no antidote for unbridled fear,” Trone wrote. “Trading counterparties are crucial, because this revenue flow keeps the lights on.”

In January, SocGen said it had fallen victim to the world’s largest rogue trading scandal, unveiling 4.9 billion euros ($6.1 billion) of losses it said were caused by Jerome Kerviel, a 31-year-old junior trader.

Credit default swaps on Goldman widened 15 basis points to 310 basis points, or $310,000 per year for five years to insure $10 million of debt, Phoenix Partners Group said. The cost for Morgan Stanley widened 15 basis points to 415 basis points. 

Read more

Anheuser-Busch Cos. agreed to pay $2.5 million in legal fees to settle lawsuits filed by shareholders seeking more money in a planned takeover by Belgian brewer InBev NV.

InBev said in June it would buy Anheuser-Busch for $65 a share or about $46 billion. After resistance from the St. Louis-based brewer, InBev in July raised the offer to $70 a share, or about $52 billion, spurring A-B to agree to the sweetened offer.

A-B shareholders filed 11 lawsuits in Delaware Chancery Court challenging the initial offer. In court papers filed Wednesday, lawyers for the company and shareholders agreed "the settlement is in the best interests of the parties internet pay day loans."

The settlement, which requires a judge’s approval, includes A-B paying the fee to shareholders’ lawyers, according to court papers.

Anheuser-Busch shareholders will meet on Nov. 12 to vote on the proposed deal. InBev expects investors to approve the deal, which should close by the end of the year.

Source

Having seen shares decline by more than half over the past three months, Peabody Energy Corp.’s board on Friday doubled the size of the company’s existing stock repurchase program to $1 billion.

The St. Louis-based coal producer has been buying back stock under the program since June 2005, and said it may repurchase shares or discontinue the buyback plan at any time. Companies buy their own shares to help raise earnings per share and boost their stock price.

"The fundamentals of the business are sound and we maintain strong capacity to continue to grow the company," Chief Executive Gregory H freecreditreport. Boyce said in a statement.

The company had repurchased about $100 million of stock under the plan as of June 30 and "we have continued to be active since then," Peabody spokesman Vic Svec said.
Peabody had 270.7 million shares outstanding at Sept. 30, and will provide updated stock repurchase data in its next quarterly filing with the Securities and Exchange Commission.

jtomich@post-dispatch.com | 314-340-8320

Source

The credit crisis will spur more takeovers in the oil and gas industry as cash-rich oil majors and utilities pounce on small and mid-cap companies whose shares have been hit hard as they struggle to fund developments.

Oil majors such as Exxon Mobil (XOM.N: Quote, Profile, Research, Stock Buzz) and Royal Dutch Shell Plc (RDSa.L: Quote, Profile, Research, Stock Buzz) will likely use the crisis to accelerate their strategic push into North American gas production and the Canadian oil sands, bankers and analysts said.

Similarly, utilities like Germany’s RWE (RWEG.DE: Quote, Profile, Research, Stock Buzz), France’s GDF Suez (GSZ.PA: Quote, Profile, Research, Stock Buzz) and Britain’s Centrica (CNA.L: Quote, Profile, Research, Stock Buzz), which have long sought to produce more of the gas they retail, are also predicted to take advantage of lower asset prices.

“We would expect there to be more consolidation,” said Karl Nietvelt, director of oil and gas at S&P. “Prices are indeed very cheap.”

Recession fears have halved the price of oil since July, when it topped $147/barrel cashadvance. The drop has hit share prices across the sector but small and mid-size oil and gas exploration and production (E&P) firms have been among the hardest hit.

This is because the E&P players are more leveraged to crude than the oil majors, which have refining, chemicals and retail units, and because, with low production levels or none at all, the E&P firms are more reliant on debt funding.

Devon Energy President John Richels said earlier this month he expected consolidation among mid-size North American E&P players, typically worth between $5 billion and $20 billion, which have expanded rapidly in recent years.

Thierry Bros, analyst at Societe Generale in Paris, said the majors may snap up such firms or their assets to help address their own failure in recent years to grow their reserve bases. 

Read more

Eli Lilly and Co (LLY.N: Quote, Profile, Research, Stock Buzz) will record a $1.4 billion charge because of probes into past marketing of its top-selling Zyprexa schizophrenia drug and is in advanced talks to resolve the investigations, the company said on Tuesday.

Lilly will record the charge, which totals $1.29 a share, in the third quarter. Analysts are expecting profit of $1.02 a share before special items for the period, according to Reuters Estimates.

The company has faced long-running accusations that it improperly marketed Zyprexa to patients who were not approved users and that it played down side effects such as weight gain, which can increase the risk for diabetes.

The U.S. Attorney’s Office in Philadelphia launched a probe into the matter in early 2004, and Lilly received a grand jury subpoena for Zyprexa-related documents this past November, the company said.

The Medicaid fraud control units of more than 30 states are coordinating with federal prosecutors in the investigation of any claims related to the health insurance program for the poor savings account payday advance.

If the discussions are successfully concluded, the company expects they would settle the Zyprexa-related federal claims as well as the Medicaid-related claims of states, Lilly said. It said the $1.4 billion charge reflected the company’s “currently estimable exposure” with respect to these matters.

Eleven states, including Pennsylvania, Connecticut and Mississippi, have filed lawsuits over Zyprexa and are not participating in the coordinated investigation, Lilly said.

“The government’s investigation of Zyprexa has been ongoing for five years, and we now have a heightened sense of responsibility to all our stakeholders to intensify efforts to resolve these issues,” Lilly General Counsel Robert Armitage said in a statement. 

Read more

LIVONIA, Mich.–As negotiations for General Motors Corp. to acquire Chrysler LLC appear to be gaining momentum, United Auto Workers President Ron Gettelfinger said yesterday he is very concerned that the deal may happen, with many workers losing their jobs.

Gettelfinger said he knows the companies have been holding talks for a long time and there probably are steps the union could take to try to halt any merger. But that would be speculation at this point, he said.

"Let’s say we’re concerned that it’s coming because of the impact that it would have on our workforce," Gettelfinger said at a union hall rally for U.S. Democratic presidential candidate Barack Obama.

Neither Chrysler nor GM has contacted the union about the acquisition talks, he said, but he cited reports about the merger that say GM would look to take costs out if it were to acquire Chrysler.

"That’s going to mean a reduction of workers," he said. "I don’t know just exactly how that would work out, but yes, we are very concerned about that pay day advance." Chrysler has 66,409 employees, most in North America. The UAW represents about 33,000.

Gettelfinger said the union also is concerned about further job cuts at GM as it tries to deal with slumping sales and the credit crisis. The automaker has announced more than 4,300 layoffs at its factories since Monday, and industry analysts have said more may be on the way.

Chrysler CEO Bob Nardelli, in a TV interview on Thursday, would not comment on talks with GM, but said economic troubles have made the industry ripe for consolidation, "where you can get synergies of productivity that will allow you to be more competitive, not only here in the U.S., but on a global basis."

GM has discussed a merger or acquisition with Cerberus Capital Management LP, the private equity firm that owns 80.1 per cent of Chrysler, according to a source.

Associated Press

Source

WINNIPEG – About 1,000 employees looking for a new contract walked off the job at the Winnipeg Free Press on Monday.

Negotiators for the daily newspaper and the Communications, Energy and Paperworkers Local 191 were at the bargaining table for most of the weekend trying to reach a last-minute deal.

But union spokeswoman Mary Agnes Welsh said the talks were unproductive.

She said sticking points include pensions, benefits and job security best payday advance.

Free Press publisher Bob Cox said he was optimistic an agreement could be reached before the end of the day.

He said management would continue to provide news through the newspaper's website for the duration of the strike.

Source

Wachovia Corp. says securing shareholder approval of its pending acquisition by Wells Fargo & Co. “would seriously jeopardize the financial viability of Wachovia.â€

The audit committee of the company’s board, citing an exception in the New York Stock Exchange’s policy for such a situation, has approved Wachovia’s decision not to seek shareholder approval for the deal. And the NYSE has accepted Wachovia’s application of the exception.

Charlotte, N.C.-based Wachovia (NYSE:WB) says it will mail a letter to all shareholders notifying them of its intention.

Wells Fargo (NYSE:WB) is based in San Francisco.

Wachovia has no retail banking operations in the Albany, N.Y., area, but Wachovia Securities has about 70 brokers, and 110 total employees, in offices in Albany, Colonie, Latham, Saratoga Springs and Johnstown.

Source

CHARLESTON, W.Va. — A coal company belonging to Bob Murray, the mine owner who entered the national spotlight last year when nine people died in a Utah mine, was fined $1.46 million Wednesday by federal regulators for safety violations at an Illinois operation.

Murray Energy’s Galatia Mine in southern Illinois repeatedly ignored safety regulations between September 2007 and January, leading to nine citations for flagrant violations, the federal Mine Safety and Health Administration said. Galatia is operated by Murray subsidiary American Coal Co.

"American Coal Co. repeatedly demonstrated its failure to comply with basic safety laws over a number of months," MSHA director Richard Stickler said in a statement.

Murray blasted the MSHA, calling the fines politically motivated retaliation for the company’s decision to ask the U.S. Department of Labor to investigate the agency’s actions at Galatia.

"The company has documented numerous incidences in its complaint to the inspector general that MSHA has violated its own regulations and ‘made up the rules as they see fit,’" Murray said in a statement.

However, Galatia has incurred numerous safety violations in recent years quick faxless payday loan. A jump in infractions in 2005 prompted a Post-Dispatch analysis last year that showed Galatia was penalized by federal regulators during the first half of 2007 as much as the rest of Illinois’ underground coal mines combined. During that six month period, Galatia had amassed 999 safety violations and $1.5 million in fines.

Ohio-based Murray also owns the Crandall Canyon mine in Utah, where six miners and three would-be rescuers were killed by cave-ins in August 2007. MSHA fined Murray $1.6 million for violations that investigators determined directly contributed to the deaths of the six miners. It also asked federal prosecutors to consider criminal charges.

At Crandall Canyon, MSHA concluded the collapse was caused by aggressive mining that carved out too much coal and overloaded roof supports. The agency itself was faulted by the Department of Labor for lax oversight before the collapse and for its handling of the rescue.

Crandall Canyon has since been sealed, but Murray still produces about 30 million tons of coal annually from complexes in Utah, Ohio, Illinois and Kentucky.

Source

South Korea’s currency fell to its lowest level since the Asian financial crisis a decade ago on fears the region’s fourth-largest economy could buckle in the turmoil tearing through global markets.

President Lee Myung-bak dismissed suggestions this week that the country faced a repeat of the Asian financial crisis that pushed South Korea to the edge of sovereign default and senior government officials have repeatedly tried to reassure investors that the banking system can withstand the credit upheaval.

That message was reiterated on Wednesday by Bahk Byong-won, senior secretary to the president, who said the government believed the won’s fall was a threat to inflation but liquidity at local banks was not a major problem.

“What I hear from them is that it’s not that serious,” Bahk told reporters.

Investors remain unconvinced and analysts said that as the global financial crisis continues to hammer South Korea, the won is likely to slide further.

The won slumped as much as 5 percent on the day to 1,398 per dollar, its lowest level since South Korea was beginning to emerge from the ravages of Asia’s financial meltdown in 1997/98 (payday loan). It later edged back up to 1,376.90/1,377.10.

This week alone the currency has skidded more than 12 percent in value against the dollar as investors fretted over a global credit crisis that has starved the country’s banks of dollars and fueled the worst capital flight from South Korea since the collapse of Asia’s markets a decade ago.

“Further losses cannot be ruled out,” said Patrick Bennett, strategist at Societe Generale in Singapore. “Portfolio flows are coming out of the market and the level of offshore borrowing by the bank sector remains a risk investors are unwilling to accept - despite the still high level of FX reserves.” 

Read more