jpm

Analyst upgrades:

• UBS believes US airlines estimates are too low and will move higher. The firm upgraded AirTran (NYSE: AAI), AMR Corp (NYSE: AMR), Continental (NYSE: CAL), Delta (NYSE: DAL) and Northwest (NYSE: NWA) to Buy from Neutral and JetBlue (NASDAQ: JBLU) to Neutral from Sell.
  
• JMP Securities upgraded DealerTrack (NASDAQ: TRAK) to OUtperform from Market Perform as they believe 2H08 guidance represents a floor and that 2009 estimates are achievable, among other reasons.
• Potash (NYSE: POT) and Mosaic (NYSE: MOS) were raised to Buy from Hold at Soleil.
  
• Argus upgraded Seagate (NYSE: STX) to Buy from Hold on Friday.

Analyst downgrades:

• Jefferies downgraded Citrix Systems (NASDAQ: CTXS) to Underperform from Hold as they do not see a catalyst for the company to grow into 2009 consensus estimates. The firm lowered their target price to $25 from $32.
  
• Citigroup said following Lehman's (NYSE: LEH) bankruptcy, they expect a distressed-sale of American International's (NYSE: AIG) MBS portfolio, resulting in the worst quarter yet for the company. Shares were cut to Hold from Buy.
• D.R. Horton (NYSE: DHI) was downgraded to Sell from Hold and Pulte Homes (NYSE: PHM) was downgraded to Hold from Sell at Citigroup.
  
• Merrill downgraded Goldman Sachs (NYSE: GS) to Neutral from Buy and JP Morgan (NYSE: JPM) to Underperform from Neutral.

Twelve banks, lead by JP Morgan (NYSE:JPM) and Goldman Sachs (NYSE:GS), will set up a $70 billion loan facility which any of them can draw on in an emergency.

According to The Wall Street Journal, "The pool would act as a signal to the marketplace that banks, brokerages, and other financial companies can lean on the fund to take care of borrowing needs."

By some accounts, any one of the members in the pool can take down 33% of the $70 billion. If the financial crisis gets significantly worse, the partners may be battling each other for that money. Competition for the capital could become unpleasant.

One other way to look at the fund is that it is an M&A facility. If any single bank or broker owes the fund $30 billion, it may be a way for a stronger member, say Goldman, to buy that company by taking on its loan obligation.

An acquisition fund disguised as a lender venture. How clever.

Douglas A. McIntyre is an editor at 247wallst.com.

Hank Paulson is keenly aware that his Goldman Sachs Group (NYSE: GS) and Treasury predecessor, Robert Rubin, helped save the market by encouraging the then-head of the New York Fed to force Wall Street leaders to team up to save Long-Term Capital Management's collapse from taking down the financial markets. Just as George W. Bush needed to recap Iraq, so now does Hank Paulson need to recap that famous meeting in lower Manhattan.

Bloomberg News reports that the meeting -- which took place yesterday afternoon -- involved a rogues gallery of Wall Street executives coupled with Paulson and New York Fed president Tim Geithner. The message these regulators delivered was reportedly a simple one: "You need to solve your own problems, and we're not going to provide any more capital." But Wall Street -- as represented by the likes of "Citigroup, Inc. (NYSE: C)'s Vikram Pandit, JPMorgan Chase (NYSE: JPM) 's Jamie Dimon, Morgan Stanley (NYSE: MS)'s John Mack, Goldman's Lloyd Blankfein, and Merrill Lynch & Co., Inc.'s (NYSE: MER) John Thain" -- are convinced that the Fed will blink when it comes to the 158 year old Lehman Brothers Holdings (NYSE: LEH).

Bank of America (NYSE: BAC) reportedly wants to put in a bid for Lehman contingent on getting government help -- such as the $29 billion JPMorgan got in its Bear Stearns acquisition and its nationalization of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). After these two precedents, Paulson now wants to reverse himself. He says Lehman is different because people have known it was in trouble for a long time and it can access the Fed's discount window. But I think this could just be a little show for the President who is worried about how this will look to history. He may not realize that he has already opened the Pandora's Box of moral hazard and can't shut it now.

In the last year, Washington has been shoveling our tax dollars out the door to bail out the money mistakes of multi-billionaires.

It cut interest rates from 5.25% to 2% ,which sent inflation soaring, yet mortgage rates remain higher than they were a year ago. It spent $29 billion to finance the merger of Bear Stearns and JPMorgan Chase & Co. (NYSE: JPM). And now it's about to spend as much as $800 billion to bailout a few huge investors who own mortgage-backed securities (MBS) issued by Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE).

I find the reasons why this latest bailout shouldn't happen to be far more compelling than the reasons it should. (Here's some background on the mortgage giants.)

Here are five reasons I think this bailout shouldn't happen:

• Punishes the innocent and rewards the guilty. Why does it make sense for taxpayers -- most of whom are paying their mortgages on time and working hard to support their families despite declining real wages and higher costs -- be asked to dig into their pockets to clean up the errors of a few large institutional investors? Why not let the people who made the bad decisions pay for their own mistakes?

A friend of mine was part of the team that worked on an acquisition for InBev, which is the mega Belgian beer company. He was impressed with the company's merger skills and had little doubt the transaction would work.

Well, global investors are impressed too (which is no easy feat in this tough global economic environment). In fact, according to a piece in the Wall Street Journal (subscription required), it looks like InBev is effectively managing the $45 billion in debt financing for the acquisition of Anheuser-Busch (NYSE: BUD).

No doubt, this is a complicated process. After all, InBev has organized a syndicate of top banks, which include Deutsche Bank, JP Morgan (NYSE: JPM), Barclays Capital, Royal Bank of Scotland, ING Bank, Banco Santander, BNP Paribas, Fortis, Bank of Tokyo-Mitsubishi and Mizuho Corporate Bank.

For the most part, the senior management team at InBev understands the global financial world (keep in mind that there is a deep bench of former investment bankers). Besides, the company has been diligent with maintaining a strong credit rating, which helps to minimize the financing risk.

In other words, to get a big deal completed nowadays, the quality needs to be top-notch. And, for the most part, InBev fits the bill.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Big Lots Inc. (NYSE: BIG) Q2 profits topped expectations, but it warned of weak sales in the second half.
• China Petroleum and Chemical Corp. (NYSE: SNP) first-half profits tanked due to government price controls.
• Dell Inc. (NASDAQ: DELL ) fell short of Q2 earnings estimates, surprising even Jim Cramer.
• Dillard's Inc. (NYSE: DDS) beat analysts' expectations despite widening its Q2 net loss.
• Gilat Satellite Networks Ltd. (NASDAQ: GILT) missed Q2 expectations and a merger fell through.
• J. Crew Group Inc. (NYSE: JCG) Q2 net income slipped on lower sales and gross margins.
• JP Morgan & Chase Co. (NYSE: JPM) earnings have been hurt by investments in Fannie Mae/Freddie Mac.
• LDK Solar Co. (NYSE: LDK) raised its 2009 revenue guidance on reaching peak silicon wafer capacity.
• Marvell Technology Group (NASDAQ: MRVL) beat Q2 expectations but gave a conservative Q3 outlook.
• Rio Tinto Group (NYSE: RTP) first-half profits more than doubled on its acquisition of Alcan.
• Sanderson Farms Inc. (NASDAQ: SAFM) swung to a Q3 loss due in part to rising commodities prices.
• Sears Holdings Corp. (NASDAQ: SHLD) Q2 earnings plunged more than expected on further sluggish sales.
• SkillSoft PLC (NASDAQ: SKIL) beat Q2 expectations and offered Q3 and full-year guidance.
• Smithfield Foods Inc. (NYSE: SFD) swung to a Q1 loss due in part to rising commodities prices.
• Talbots Inc. (NYSE: TLB) nearly doubled its Q2 loss due to lower sales and restructuring charges.
• Thornburg Mortgage Inc. (NYSE: TMA) posted a Q2 profit but warned of possible collapse on margin calls.
• Tiffany & Co. (NYSE: TIF) doubled its Q2 profit on strong international sales, and raised its guidance.
• TiVo Inc. (NASDAQ: TIVO) unexpectedly swung to a Q2 profit but forcast another loss in Q3.

Upcoming quarterly reports include Guess (NYSE: GES), Collective Brands (NYSE: PSS), H&R Block, (NYSE: HRB), Staples (NASDAQ: SPLS), Ciena (NASDAQ: CIEN), Toll Brothers (NYSE: TOL); and National Semiconductor (NASDAQ: NSM).

Visit AOL Money & Finance for more earnings coverage.

Individual investors and mutual funds are not the only ones who have been burned on the stock price drops at Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). JP Morgan (NYSE: JPM) reported Monday that it has lost $600 million on its investment in the two companies. According to Reuters, the big bank holds preferred stock in the mortgage firms.

The news begs the question of what other banks have similar investments and how much losses from these investments will damage their earnings?

Banks are in enough trouble due to subprime paper holdings, LBO debt and credit card loan pools. Holdings in the mortgage agencies could add enough on the pile to hurt third quarter earnings and cause losses for some firms.

Investors have yet another reason to stay away from bank stocks.

Douglas A. McIntyre is an editor at 247wallst.com.

The following two-part article puts forth ten stock ideas that I believe would be better off in your investment portfolio than one comprised primarily of Certificates of Deposits (CDs) or bonds, or even government treasuries. This is not to say that CD's do not have value or offer some level of security, but they are long term losers.

A basket of high yielding-high quality stocks can offer a higher return, better tax advantages, and the potential of significant appreciation for those with a long time horizon. Five year CD earning 4%, or a utility stock? I pick the utility every time.

My wife sent me the following quote from Ambrose Redman that I thought would be worth sharing with readers: "Courage is not the absence of fear but rather the judgment that something else is more important than one's fear."

It seems that might be extended to one's view on investing as well. What is really important, the short term or the long term, growth or value, the promise of riches or the hope for stability? In each case I would favor the latter over the former and this brings to mind one of my pal Warren's lessons: Do not buy a stock unless you would be happy to own it even if the market was closed for ten years.

Berkshire Hathaway (NYSE: BRK.A and BRK.B) is certainly a candidate. Take a look at last week's Chasing Value: Considering Berkshire Hathaway... again. However, it does not pay a dividend. The following five quality stocks do:

TheStreet.com's Jim Cramer says the common would be crushed on a government takeover, but everything else would be saved.

The most important positive that must occur in this economy is for housing to stop going down. It is even more important than oil going down, because it cuts to the core of consumer confidence and credit.

House prices are coming down, but that's not enough. We also need lower mortgage rates, and the spread between the mortgage rates and Treasuries is so high that it's hard to make case that you are getting any sort of bargain at all on the money you are trying to borrow. It should be a great time to buy a house -- no demand, plenty of supply -- but mortgage rates are just too high.

But we all know how they would go down and go down big -- if Treasury took over Fannie (NYSE: FNM) (Cramer's Take) and Freddie (NYSE: FRE) (Cramer's Take) this weekend. If you back off Fannie's and Freddie's bonds, you get a decline in rates of mammoth proportions. It might make sense to buy a house simply because the rates would be so low.

In December, 2002, ten of the most prominent brokerage firms in the country agreed to a massive settlement. The charges involved well-documented claims that analyst reports issued by these firms were deceptive. The firms sold out their retail clients to curry favor with their underwriting clients.

Among the settling firms were Citigroup (NYSE: C), UBS (NYSE: UBS), JP Morgan Chase & Co. (NYSE: JPM), and Morgan Stanley (NYSE: MS).

Their conduct was so bad that former Attorney General Spitzer agonized over whether to indict them for criminal conduct.

The industry unleashed a massive PR campaign. It convinced you that it saw the error of its ways. They had "reformed." You could trust them again with your hard earned assets.

And you did. Money flowed back in the coffers of these firms and others.

That was the first time.

Investment banks are beginning to rethink their commitments to doing business in Russia. The New York Times reports that many investors believe the risks of doing business in Russia are beginning to exceed the benefits. Maybe that is what Russia intends. Once western investors have put their money in, why not push them out and take their property?

Here are some examples:

• Mechel - The Times reports that Vladimir Putin's criticism of the CEO of Mechel, a coal mining and steel company, wiped out billions of dollars of its stock market value
• BP-TNK - The CEO and other western executives of BP-TNK, BP's (NYSE: BP) joint venture in Russia, were shoved out under pressure from the government and BP's Russian partners.
• Declining stock market - The Russian stock market is down 25% in the last two months, alone.
• Evaporating investment banking business - According to the Times, "Investment banking revenue from Russia was $148 million from mid-July to now. That is down from $260 million from mid-June to mid-July."

Bloomberg News reports that two more big banks -- JPMorgan Chase (NYSE: JPM) and Morgan Stanley (NYSE: MS) have made offers of $7 billion to 30,000 holders of Auction Rate Securities (ARS) -- those long-term securities whose yields reset in weekly auctions until the auctions failed this February. JPMorgan and Morgan Stanley also agreed to $60 million worth of fines. This brings to five the number of large firms that have settled so far. The Wall Street Journal reports that of the big firms that have yet to settle, Goldman Sachs (NYSE: GS) is proving to be among the most unhelpful to its clients.

Meanwhile, the Wall Street Journal's James Stewart, who first got me writing about the ARS catastrophe, has finally broken his silence. And he seems to think that the ARS mess is much worse than he originally thought back in February. Stewart was shocked that brokers were unloading this toxic waste on customers so they could get it off of their books and out of the accounts of their executives. Stewart's reaction struck me as surprisingly naive -- particularly considering his long track record of reporting on Wall Street misdeeds.

Nevertheless, the problems with the frozen ARS continue to stress out investors who fell victim to Wall Street's chicanery. Among the top 10 municipal ARS issuers, the following have yet to offer any restitution to ARS holders (the value of their 2007 ARS issuance is in parentheses):

• Goldman Sachs ($4.3 B)
• Bank of America (NYSE: BAC) ($3.7 B)
• RBC Capital Markets ($1.2 B)
• Lehman Brothers (NYSE: LEH) ($1.1 B)
• Wachovia (NYSE: WB) ($0.6 B)

Today was somewhat tiring -- there was no real direction and the media was competing for any broad stories with meat to them. Selling picked up at the end of the day and broke a three-day run. The US trade deficit came in narrower than expected and oil prices came down another $1.00+ to well under $114 per barrel. While there was more negative news in financial stocks, today's drumming may have been more analyst driven than on other days where large drops were seen. As you will see, bond yields came down sharply today.

Here are today's unofficial closing bell levels:
DJIA 11,642.47 (-1.19%)
S&P500 1,289.59 (-1.20%)
NASDAQ 2.430.61 (-0.38%)
10 YR T-Note 3.918% (-0.08%)
Top Analyst Upgrades
Top Analyst Downgrades

Apple Inc. (NASDAQ: AAPL) rose on two separate analyst calls. It was started as "Outperform" in news coverage at Credit Suisse and Lehman Brothers also reiterated an "Outperform" rating. Shares were up almost 25 at $176.48 in today's final minutes.

Capstone Turbine Corp. (NASDAQ: CPST) managed to rack up gains despite fears over cautious earnings. The company had a single order that accounted for this and racked up another gain to its backlog. Shares were up 7.5% at $2.61 in today's final minutes. Here are the Q&A comments from the conference call.

CNNMoney reports that Morgan Stanley (NYSE: MS) is the latest bank to buy back its worthless Auction Rate Securities (ARS) from individual investors. With that buyback, Morgan Stanley follows in the wake of Citigroup, Inc. (NYSE: C), Merrill Lynch & Co., Inc. (NYSE: MER) and UBS AG (NYSE: UBS).

CNNMoney notes that Morgan Stanley said it would offer to repurchase all ARS "held by individuals, charities and small and medium-sized business with accounts of $10 million or less at the bank." Morgan Stanley will begin to start buying back $4.5 billion worth of ARS on September 30th and will "make its best effort to provide liquidity solutions" for institutional investors by the end of 2009. But New York attorney general Andrew Cuomo is not satisfied with Morgan Stanley's proposal.

Meanwhile, the list of big ARS issuers that have not settled grows shorter. Here are six holdouts (with their 2007 municipal ARS issuance in parentheses):

• JPMorgan Chase (NYSE: JPM) ($5.2 B)
• Goldman Sachs (NYSE: GS) ($4.3 B)
• Bank of America (NYSE: BAC) ($3.7 B)

TheStreet.com's Jim Cramer says all that money has to go somewhere, and this is a likely destination.

Clash of the ideals! Oil's down, and what can you buy when there's so much bad bank news? What can you buy when Wachovia (NYSE: WB) (Cramer's Take) is boosting reserves and Morgan Stanley (NYSE: MS)) (Cramer's Take) is still being pursued by authorities and JPMorgan (NYSE: JPM) (Cramer's Take) says July stunk and UBS (NYSE: UBS) (Cramer's Take) is so tarnished that you can't believe it was once the most conservative blue chip out there.

The answer is tech, of course!

Wait a second. Would anyone mind if we actually had a reason to buy tech beyond the Kindle, the device that made Citigroup gaga about Amazon (NASDAQ: AMZN) (Cramer's Take) -- not that you needed a device to do that.

Sure, we have pre-seasonality. Remember, you are supposed to buy tech at the end of the summer, not that anyone waits that long.

But what we really have is that quant thinking that Doug rails about so correctly: the CDO of stocks! We take a little bad tech, the lowest-end stuff like RF Micro (NASDAQ: RFMD) (Cramer's Take) and Parametric (NASDAQ: PMTC) (Cramer's Take); mix in some mid-tech, stuff like National Semi (NYSE: NSM) (Cramer's Take) and Analog Devices (NYSE: ADI) (Cramer's Take); then throw in Intel (NASDAQ: INTC) (Cramer's Take), Microsoft (NASDAQ: MSFT) (Cramer's Take), Google (NASDAQ: GOOG) (Cramer's Take), Amazon and Adobe (NASDAQ: ABDE) (Cramer's Take) -- yes, Adobe; then split them into tranches, slice 'em up, and offer a derivative on them for those who want leverage and we have, well, a tech rally!