David Einhorn Helps $AAPL To Gap Up on a Plan That Could Add $300+ to the Share Price

“…..Einhorn says Apple could create hundreds of billions worth of value:

For example, Apple could initially distribute to existing shareholders $50 billion of perpetual preferred stock, with a 4% annual cash dividend paid quarterly at preferential tax rates. Once a trading market is established and the market recognizes the attractiveness of a highly liquid, steady yielding instrument from an issuer backed by Apple’s unmatched balance sheet and valuable franchise, the Board could evaluate unlocking additional value by distributing additional perpetual preferred stock to existing shareholders.  With this conservative action, Greenlight believes the Board could unlock hundreds of billions of dollars of latent shareholder value.

Assuming Apple retains its price to earnings multiple of 10x and the preferred stock yields 4%, our calculations show that every $50 billion of perpetual preferred stock that Apple distributes would unlock about $30 billion, or $32 per share in value.  Greenlight believes that Apple has the capacity to ultimately distribute several hundred billion dollars of preferred, which would unlock hundreds of dollars of value per share.  Further, Greenlight believes additional value may be realized when Apple’s price to earnings multiple expands, as the market appreciates a more shareholder friendly capital allocation policy….”

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“Standard & Poor’s Ratings Services could face a much higher legal bill than the $5 billion sought by the federal government as more and more states join the battle against the credit-ratings firm.

A raft of lawsuits this week from attorneys general from several states, including California and Iowa, is compounding S&P’s legal woes over its role during the financial crisis of 2008-2009.

Fu

On Tuesday, the Justice Department sued S&P for allegedly causing some banks and credit unions to lose $5 billion after relying on the company’s ratings of mortgage-linked securities.

However, the $5 billion claim, which S&P has dismissed as “meritless,” is only part of the legal battle being fought by the world’s largest credit-ratings firm by number of deals rated.

Thirteen states and the District of Columbia have followed in the Justice Department’s footsteps, filing separate lawsuits against S&P on Tuesday. The California attorney general alone is suing S&P for about $4 billion to recover funds for two of the country’s largest public pension funds, according to its lawsuit.

Other states, such as Colorado and Arkansas, are demanding S&P give back the revenue it earned on precrisis ratings of hundreds of securities. State prosecutors allege S&P presented its ratings as based on objective and independent analysis but actually were inflated to cater to the banks that helped arrange and sell the securities.

In a statement Wednesday, an S&P spokesman said “any allegations that we compromised our analytic integrity for business considerations are simply false.”

Not all of the states’ lawsuits specify the amount they are seeking. However, a 2011 Senate report pegged S&P’s revenue on mortgage-related securities at $2.3 billion from 2002 to 2007….”

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“When an outside analysis uncovered serious flaws with thousands of home loans, JPMorgan Chase executives found an easy fix.

Rather than disclosing the full extent of problems like fraudulent home appraisals and overextended borrowers, the bank adjusted the critical reviews,according to documents filed early Tuesday in federal court in Manhattan. As a result, the mortgages, which JPMorgan bundled into complex securities, appeared healthier, making the deals more appealing to investors.

The trove of internal e-mails and employee interviews, filed as part of a lawsuit by one of the investors in the securities, offers a fresh glimpse into Wall Street’s mortgage machine, which churned out billions of dollars of securities that later imploded. The documents reveal that JPMorgan, as well as two firms the bank acquired during the credit crisis, Washington Mutual and Bear Stearns, flouted quality controls and ignored problems, sometimes hiding them entirely, in a quest for profit.

The lawsuit, which was filed by Dexia, a Belgian-French bank, is being closely watched on Wall Street. After suffering significant losses, Dexia sued JPMorgan and its affiliates in 2012, claiming it had been duped into buying $1.6 billion of troubled mortgage-backed securities. The latest documents could provide a window into a $200 billion case that looms over the entire industry.In that lawsuit, the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, has accused 17 banks of selling dubious mortgage securities to the two housing giants. At least 20 of the securities are also highlighted in the Dexia case, according to an analysis of court records.

In court filings, JPMorgan has strongly denied wrongdoing and is contesting both cases in federal court. The bank declined to comment.

Dexia’s lawsuit is part of a broad assault on Wall Street for its role in the 2008 financial crisis, as prosecutors, regulators and private investors take aim at mortgage-related securities. New York’s attorney general, Eric T. Schneiderman, sued JPMorgan last year over investments created by Bear Stearns between 2005 and 2007.

Jamie Dimon, JPMorgan’s chief executive, has criticized prosecutors for attacking JPMorgan because of what Bear Stearns did. Speaking at the Council on Foreign Relations in October, Mr. Dimon said the bank did the federal government “a favor” by rescuing the flailing firm in 2008….”

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“…..Kass was just on CNBC, and he made some rather dramatic comments.

“I’m getting the ‘summer of 1987 feeling’ in the U.S. equity market,” Kass told CNBC, “which means we’re headed for a sharp fall.”

For those who don’t remember the summer of 1987, here is what it looked like:

…”

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“MINNEAPOLIS (AP) — Discount retailer Target Corp. says Thursday that a key revenue measure rose 3.1 percent in January as shoppers bought holiday clearance merchandise.

Analysts had expected a 1.7 percent increase for the four weeks ended Jan. 26, according to Thomson Reuters.

The figure is based on revenue at stores opened at least a year and is considered an indicator of a retailer’s health because it excludes results from stores recently opened or closed.

Total revenue for the five weeks ended Feb. 2 were $5.97 billion, up 29.6 percent from a year ago.

In a statement, Gregg Steinhafel, chairman, president and CEO of the Minneapolis-based retailer says that customers continue to shop cautiously in the face of a slow economic recovery and new financial pressures like the recent payroll tax increase.”

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Last weeks 368k moves up to 3705k

Productivity falls 2%…

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“NEW YORK (AP) — Sprint Nextel, the country’s third largest wireless carrier, says it lost $1.3 billion in its fourth quarter, about the same as a year ago, as it revamped its network for a comeback versus bigger competitors.

The Overland Park, Kan., company lost 44 cents per share in the October to December period versus 43 cents per share in the previous year.

The loss was slightly smaller than analysts had predicted. The average Wall Street forecast as polled by FactSet was 46 cents per share.

Revenue was $9 billion, up 3.2 percent from a year ago and slightly above analyst expectations of $8.9 billion.

Long-ailing Sprint Nextel Corp. has agreed to sell 70 percent of itself to Softbank Corp. of Japan for $20 billion. That deal is expected to close this summer.”

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“TOKYO (AP) — Sony Corp. is still struggling but managed to reduce its red ink for the latest quarter as the Japanese electronics and entertainment company aims for a comeback from record yearly losses.

Sony on Thursday reported a 10.7 billion yen ($115 million) loss for the October-December quarter compared with a 158 billion yen loss a year earlier.

The company had a record loss of 457 billion yen for the fiscal year through March 2011 as its TV business struggled and it suffered from factory and supplier damage in northeastern Japan from the 2011 earthquake and tsunami.

Quarterly sales inched up nearly 7 percent to 1.95 trillion yen ($21 billion) despite declining sales of gadgets such as flat-panel TVs and Blu-ray video recorders, but only because Sony got a perk from a weaker yen.

The yen has been weakening because of expectations the central bank will ease monetary policy and that helped Sony by boosting the value of its overseas sales.

Sony has lost money for the past four years as it fell behind powerful rivals such as Apple Inc. and Samsung Electronics Co. in profitability and innovation…”

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“Credit Suisse Group AG, Switzerland’s second-largest bank, raised its target for cost reductions for a third time in seven months as it posted fourth-quarter earnings that fell short of analysts’ estimates.

Credit Suisse will seek an additional 400 million Swiss francs ($441 million) in cost savings by the end of 2015, on top of 4 billion francs in planned cuts announced since 2011, the Zurich-based company said today.

Chief Executive Officer Brady Dougan said in an interview with Bloomberg Television that the measures the bank has already taken put it in a position to “thrive” regardless of market conditions. The company’s fourth-quarter net income of 397 million francs compared with a year-earlier loss and the 647.6 million-franc estimate of analysts surveyed by Bloomberg.

“We’re coming into 2013 very well positioned, having done a lot of hard work of reducing costs, of reducing our risk- weighted assets,” Dougan, 53, said in the interview. “We really have a business model that’s ready to perform I think quite well and resiliently in 2013 and beyond.”

Credit Suisse was down 0.9 percent to 26.77 francs by 2 p.m. Before today, the stock had risen 59 percent over the past six months, compared with a 26 percent gain in the 40-companyBloomberg Europe Banks and Financial Services Index.

Capital Distribution…”

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“Spain’s borrowing costs rose even as it beat its maximum target of 4.5 billion euros ($6.11 billion) at a debt sale today as corruption allegations targeting the government threaten to reverse last month’s rally.

The Madrid-based Treasury sold a total of 4.61 billion euros of debt, including a 2.75 percent 2015 note with a yield of 2.823 percent, compared with 2.476 percent the last time it was sold on Jan. 10. A 2018 note yielded 4.123 percent, up from 3.770 percent on Jan. 17, and it sold a 2029 bond at 5.787 percent, compared with 5.555 percent at its last 15-year benchmark bond sale on Jan. 10.

The sovereign’s securities led declines among the euro- region’s so-called peripheral countries this week even as German Chancellor Angela Merkel backed Premier Mariano Rajoy after he denied receiving illegal cash payments. Demand for Spanish assets is weakening as the Treasury seeks to fast-track a higher net issuance program this year.

“The upper end of the target range wasn’t overshot significantly showing that positive momentum for peripherals has abated,” Norbert Aul, a rates strategist at Royal Bank of Canada in London said in a telephone interview. “We had a very good start this year for peripheral funding and we see some setback potential over the coming weeks even if it isn’t a full- blown sell-off.”

Bond Demand

Demand for the 2015 note was 2.21 times the amount sold, compared with 2.07 last month, while the bid-to-cover ratio was 2.24 for the 2018 one, compared with 2.32 in January, and 2.02 for the 2029 bonds from 2.85 last month….”

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“The European Central Bank left interest rates unchanged even as a stronger currency threatens the euro area’s recovery from recession.

Policy makers meeting in Frankfurt today kept the benchmark rate at a record low of 0.75 percent, as forecast by all 60 economists in a Bloomberg News survey. President Mario Draghiholds a press conference at 2:30 p.m. to explain the decision.

Recent indicators suggest the euro-area economy may return to growth later this year, easing pressure on the ECB to lower rates further. At the same time, a rising euro could hurt exports and stymie the recovery before it has begun, and looser monetary policy in the U.S. and Japan may continue to weaken the dollar and the yen.

“The euro is a little bit too strong,” Bernard Charles, Chief Executive Officer at the French software maker Dassault Systemes SA, said in an interview with Bloomberg Television today. This will “have an effect this year” on the economy and its “capacity to export,” he said.

The common currency rose 0.3 percent to $1.3568 today. It reached a 14-month high against the dollar this month and a three-year high against the yen. It has climbed 11 percent on a trade-weighted basis since Draghi pledged on July 26 to do whatever is needed to preserve Europe’s monetary union…”

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“France sold 7.98 billion euros ($10.82 billion) in debt as borrowing costs rose.

The treasury auctioned 3.02 billion euros of nine-year securities at an average yield of 2.30 percent, compared with 2.07 percent at the last such sale on Jan. 3. It sold 3.19 billion euros of 14-year bonds were sold at a yield of 2.85 percent, compared with 2.56 percent in the last auction on Dec. 6. It also sold 1.77 billion euros of seven-year debt at an average yield of 1.83 percent.

France’s second bond auction of the year comes as the European Central Bank’s promise to keep the euro intact has reduced investor concern about Italian and Spanish debt, pulling down 10-year yields for those countries. That has shifted focus to the real economy in France, where President Francois Hollande is battling joblessness at a 15-year high. Economists say France may have slipped into recession.”

“The euro rose toward a 14-month high against the dollar amid speculation European Central Bank President Mario Draghi will signal optimism about growth rather than concern at the currency’s strength at a news conference.

The 17-nation euro gained versus all its major counterparts as the ECB executive’s committee kept interest rates on hold today after reports over the past month showed investor and economic sentiment in the region improved. The pound rallied as Bank of England Governor-designate Mark Carney said the central bank must exit extraordinary measures, that tend to weaken the currency. New Zealand’s dollar fell after a government report showed employers cut jobs last quarter.

“There’s some speculative euro buying,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. Draghi “could acknowledge that the leading indicators have been pointing toward economic recovery.”

The euro advanced 0.3 percent to $1.3562 at 12:50 p.m. in London after rising to $1.3711 on Feb. 1, the strongest level since Nov. 14, 2011. The currency gained 0.3 percent to 127.03 yen after climbing to 127.71 yesterday, the highest since April 2010. The yen was little changed at 93.64 per dollar.

The ECB kept its benchmark rate at a record-low 0.75 percent today as forecast by all 60 economists in a Bloomberg News survey. Draghi will hold a press conference at 2:30 p.m. Frankfurt time to explain the decision….”

Euro’s Gain

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“The Bank of England will reinvest the first gilts to mature since it started its asset-purchase program four years ago as it sustains stimulus for an economy in a “slow” recovery.

The Monetary Policy Committee led by Governor Mervyn King will buy more bonds with the 6.6 billion pounds ($10.4 billion) associated with a gilt maturing March 7, the BOE said in a statement today. The bank also held its target for quantitative easing at 375 billion pounds and said inflation may remain above its 2 percent target for the next two years.

The decision came as Bank of Canada Governor Mark Carney, who will succeed King in July, told lawmakers that the BOE’s current policy may be enough to help the economy achieve “escape velocity.” The gilt reinvestment shows officials want to avoid tightening policy as the U.K. confronts the risk of an unprecedented triple-dip recession. While inflation is likely to remain above target longer than previously forecast, the MPC said it would “look through” this temporary factor.

“The BOE put a toe gently in the water on guidance today, by describing that it intends to look through the boost to inflation from administered prices,” said Rob Wood, an economist at Berenberg Bank in London and a former Bank of England officials “That policy is sensible. A change in the way university tuition is paid for should not change the monetary policy stance.”

The BOE didn’t say what it will do with future gilt redemptions. It said the 6.6 billion pounds comprises the redemption payment on the gilt, as well as the cash flow resulting from the indemnity provided by the Treasury to cover any difference between the redemption payment and the original amount invested. It bought the securities at an average price of about 107.3 percent of face amount, its data show.

Inflation Target…”

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“U.K. manufacturing production had its biggest monthly increase in December for five months, boosted by output of machinery and equipment and chemical products.

Factory output rose 1.6 percent from November, when it fell 0.3 percent, the Office for National Statistics said today in London. The increase was double the median forecast in a Bloomberg News survey. Total industrial production rose 1.1 percent, helped by a 3.2 percent increase in oil and gas production.

The figures suggest manufacturing gained momentum heading into the new year, easing concerns that Britain may slip back into a recession. With a survey of purchasing managers showing manufacturing activity expanded for a second month in January, the Bank of England today refrained from increasing stimulus as officials monitor inflation pressures in the economy.

“With more North Sea oil and gas production set to come on stream over the next couple of months, we anticipate another decent figure next month,” said James Knightley, an economist at ING Bank NV in London. “Furthermore, with the PMI for January also showing growth, this offers further indication that the U.K. will probably avoid the fate of dipping into recession three times in the space of five years.”

‘Slow’ Recovery…”

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“India forecast the weakest economic growth in a decade as subdued investment and elevated inflation add pressure on Prime Minister Manmohan Singh to extend policy changes and revive his development agenda.

Gross domestic product will rise 5 percent in the 12 months through March 2013, below last year’s 6.2 percent and the least since 4 percent in 2002-2003, a Central Statistical Office statement showed in New Delhi today. The median of 34 estimates in a Bloomberg News survey was 5.5 percent.

India faces inflation of more than 7 percent, one of the fastest levels in major emerging nations, limiting the extent the central bank can cut interest rates to spur expansion. The government has vowed spending curbs to damp price gains as it prepares to unveil the annual budget, part of a wider policy overhaul since September to lure capital inflows and ease bottlenecks by speeding up infrastructure projects.

“Putting out a number like this says that we need to get our act together,” said Vishnu Varathan, an economist at Mizuho Corporate Bank Ltd. in Singapore. India faces a modest recovery and the government needs to maintain the push to spur the economy, he said.

The rupee is up about 4 percent against the dollar since the policy changes began Sept. 13, while the BSE India Sensitive Index has risen 9 percent. The currency weakened 0.1 percent to 53.24 per dollar as of 1:47 p.m. in Mumbai. The stock index fell 0.3 percent. The yield on the 10-year bond maturing June 2022 dropped to 7.86 percent from 7.91 percent yesterday.

Policy Changes…”

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“China’s central bank signaled concern that inflation risks will increase and said that monetary easing by nations, including the U.S. and Japan, may push up commodity prices and make global capital flows more volatile.

China must be alert to changes in price-gain expectations and to imported inflation, the People’s Bank of China said yesterday in its fourth-quarter monetary policy report. The costs of labor-intensive products, services and agricultural goods may rise persistently on slowing labor-supply growth, the PBOC said.

“An economic recovery and demand expansion may pass into CPI in a relatively fast manner,” the central bank said.

Chinese officials are trying to sustain a rebound in growth without spurring a pickup in consumer or home prices as the Communist Party completes a once-a-decade power handover. Expansion in gross domestic product accelerated in the final three months of last year for the first time in two years.

“The central bank is signaling that room for further monetary easing is quite limited,” said Chang Jian, a Hong Kong-based economist at Barclays Plc who formerly worked for the World Bank. “But it will remain flexible to accommodate the expected crackdown on shadow banking and stricter regulation of local government financing to produce a liquidity situation that is supportive of growth.”

The Shanghai Composite Index, the nation’s benchmark stock gauge, dropped 1.3 percent at the 11:30 a.m. local-time break, headed for the first decline in nine days.

Easing Pause…”

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