9/4T8:09 News & Notes

Airline Group predicts $5.2 billion in losses - WSJ
WSJ reports the global airline industry continues to face a "perfect storm" of slowing passenger-traffic growth and high fuel prices, which could lead to a loss of $5.2 billion world-wide this year, followed by a $4.1 billion loss in 2009, the International Air Transport Association said. During a news conference in Montreal, which was Webcast, the trade body's director general, Giovanni Bisignani, said many airlines are at risk of going bankrupt as the industry heads into autumn, its weakest season for generating revenue. The industry has been losing money this year as a result of higher fuel costs, as oil averaged $113 a barrel in the first six months of 2008, compared with $73 a barrel a year earlier. The forecast for 2008 is worse than the outlook the trade group gave in June, even as fuel prices have declined. A deteriorating world-wide economy, which has helped bring down fuel prices, also has led to a slowdown in business and leisure travel. The group's first look at 2009 outlined continued tough conditions for airlines. Mr. Bisignani advised the industry to "fasten your seatbelts for at least another two years," the time it may take for the global economy to get stronger.


LEH Lehman Brothers: MUFG says no truth to Lehman acquisition report - DJ (16.94 )
DJ reports Mitsubishi UFJ Financial Group (MTU) said Thursday it doesn't plan to invest in Lehman Brothers after a media report said the bank was interested in buying a large stake in the global financial services co. "There is no truth to the report," a co spokesman said.


LEH Lehman Brothers: Mounting chatter about a possible sale is muddying the investment bank's closely watched sale of its asset-management unit - NY Post (16.94 ) -Update-
NY Post reports mounting chatter about a possible sale of Lehman Brothers to foreign investors is muddying the beleaguered investment bank's closely watched sale of its asset-management unit, which is anchored by Neuberger Berman, sources tell The Post. According to people familiar with the matter, Lehman has asked private-equity investors involved in the asset-management auction to submit the next, and perhaps final, round of bids for all or part of the business by Sept. 12. However, the bidding process has been dogged by talk of Lehman possibly nailing a fat capital infusion from the Korean Development Bank or being acquired outright by parties that include the UK's HSBC (HBC). Some bidders believe that if Lehman either gets bought out or scores enough capital to emerge from its troubles, it might nix the sale. As it stands now, Lehman CEO Dick Fuld is in the midst of an unprecedented juggling act that centers on shedding risky real-estate assets from its balance sheet while at the same time raising cash. "We tend to think of these as mutually exclusive paths and we don't believe that [Lehman's] going down both paths," said one source.


MER Merrill Lynch may fail to sell bad loans to Korea Asset - Bloomberg.com (28.33 )
Bloomberg.com reports Merrill Lynch talks to sell a "significant'' amount of bad loans to Korea Asset Management are faltering because of a dispute over price, the Korean firm's chief executive officer said. "We have yet to reach an agreement because of differences in assessing the value of assets,'' Lee Chol Hwi said yesterday in an interview in Seoul. "We have been seeking to buy a significant amount, but a deal may be difficult at this rate.'' Failure to strike a deal may indicate Merrill, the third- largest U.S. securities firm, and Lehman Brothers Holdings Inc. might have to cut prices for assets they're trying to sell as mortgage-related losses widen. Lee, 55, said state-run Korea Asset can afford to be patient because the U.S. financial crisis will probably push prices lower. Merrill CEO John Thain, who took over in December, has sold assets and subprime-linked investments as the third-largest U.S. securities firm was battered by more than $50 billion of credit market losses.

RCM Comment: The Fun House...

The fun house mirror that we call the news media is at it again. Stories abound that LEH has many different interested parties to buy or invest in the company and save it from the Bear Stearns trash heap. Then quietly and surprisingly we hear that one rumor after another is not true as evidenced by the above stories. LEH is not the only company dealing in miss information. MER's deal with the Korean bank was a sure thing last week and accolades were being given out to John Thain already. Then, Oops! today we read that the two entities are far away from a deal.
If we get rid of the mirror and look at reality we will see that possible deals that will rescue the financial stocks are probably pipe dreams. We read plenty of stories about the saving of BSC all the way down to $2 per share. We continue to hear stories of recovery in FNM / FRE and still the stocks trade to the single digits. I respectfully submit to you the reader that there is no quick fix, no white knight, to save the financial sector. Instead, more 'shoes' will drop as we go into the next EPS cycle this month and next and the stocks will at best need to revisit the old lows to build a true bottom and at worst we will see new lows.