Einhorn Vs. Apple

EINHORN VS. APPLE  |  David Einhorn says he still loves Apple. But the company needs to change, the hedge fund manager says. Mr. Einhorn, head of Greenlight Capital, filed a lawsuit on Thursday to block a plan by Apple to eliminate preferred shares and urged fellow shareholders to join him. “The standoff sets up an unusual clash between two sides who can each claim a huge following on Wall Street,” DealBook’s Michael J. de la Merced writes.

“We own more Apple today than we ever have before,” Mr. Einhorn said in a telephone interview. “We’re optimistic about the company’s prospects, and think too much bad news has been priced in.”

Apple responded diplomatically to Mr. Einhorn’s declarations. After the hedge fund manager insisted Appe should return some of its $137 billion cash pile to investors, the company released a statement saying it had been “in active discussions” about doing so. “We will thoroughly evaluate Greenlight Capital’s current proposal to issue some form of preferred stock. We welcome Greenlight’s views and the views of all of our shareholders,” Apple said in the statement.

Since at least 2005, no shareholder of Apple has formally waged a campaign against a management proposal, according to the data provider FactSet, Mr. de la Merced writes. “The spat underlines recent hand-wringing over Apple, whose stock has proved vulnerable in recent weeks.” After reaching a high of more than $700, Apple’s stock price has tumbled almost 33 percent since Sept. 21, closing on Thursday at $468.22. The stock was up almost 3 percent on Thursday after the company responded to Mr. Einhor! n.

Though Mr. Einhorn’s latest target is unusually prominent, the investor has a history of making public calls. Beginning with a bet against Allied Capital in 2002, he has attracted a cult following on Wall Street, with pronouncements that can move stock prices. Mr. Einhorn on Thursday compared Apple to his grandmother, who became extremely reluctant to spend money after surviving the Great Depression.

THE FED’S BUBBLE COP  |  The Federal Reserve may be increasing its effort to spot bubbles on Wall Street. An official at the central bank, Jeremy C. Stein, warned in a speech on Thursday about parts of the financial markets that showed signs of overheating, particularly junk bonds and mortgage-backed securities, DealBook’s Peter Eavis writes. Some market participants, like Gary D. Cohn of Goldman Sachs, have been issuing similar warnings about bonds.

While he gave no indication that Fed officials were considering any change in the policy of low interest rates, Mr. Stein described an emerging trend that might require a response if it intensified over the next 18 months, The New York Times’s Binyamin Appelbaum writes. “We are seeing a fairly significant pattern of reaching-for-yield behavior emerging in corporate credit,” Mr. Stein said.

Still, Mr. Stein didn’t say whether there was frothiness in United States Treasuries, an asset class that the Fed itself has been buying. One critic, Kevin Duffy, a portfolio manager at! Bearing ! Asset Management, asked, “Where is the mention of debt buildups at the government level that the central banks are enabling”

S.&P. CASE RECALLS ANDERSEN SCANDAL  |  The allegations in the government’s lawsuit against Standard & Poor’s this week are reminiscent of what happened at Arthur Andersen, the accounting firm, leading up to the collapse of Enron more than a decade ago, Floyd Norris, a columnist for The New York Times, writes. “S.& P., like Andersen, issued opinions that turned out to be disastrously wrong,” Mr. Norris writes. “The firm needs to prove those were honestly held opinions, not ones motivated by greed. If the government can prove otherwise, S.& P.’s future may be bleak.”

ON THE AGENDA  |  Moody’s and AOL report earnings before the market opens. The trade deficit for December is announced at 8:30 a.m. Tim Armstrong, AOL’s chief executive, is on CNBC at 10:15 a.m.

BLOOMBERG’S BRITISH EMPIRE  |  In London, “Bloomberg Place, roughly the size of a Manhattan city block, is the future European home of Michael R. Bloomberg’s company and charity. But it is only one piece of the New York City mayor’s growing British empire,” The New York Times’s Michael M. Grynbaum reports. “As he imagines a more global life for himself after City Hall, unshackled from the 24/7 needs of running New York, Mr. Bloomberg â€" an Anglophile with a taste for English Regency style â€" is e! xporting ! his vast quantities of financial, social and political capital to this ancient city, where he has long yearned for influence.”

Mergers & Acquisitions Â'

Creditors of AMR Scheduled to Meet  |  Creditors of AMR “plan to meet on Monday and could vote on a potential merger agreement between the bankrupt parent of American Airlines, and US Airways Group Inc, several people familiar with the matter said,” Reuters reports.
REUTERS

Warner Music Group Agrees to Buy EMI Assets for $765 Million  |  The Media Decoder blog reports: “The WarnerMusic Group, the smallest of the three remaining major record companies, said on Thursday that it had reached an agreement to pay $765 million for the Parlophone Label Group, a collection of EMI assets that includes artists like Coldplay, Pink Floyd and the Beach Boys.”
NEW YORK TIMES MEDIA DECODER

H.P. Directs Suppliers in China to Limit Student Labor  |  The New York Times reports that Hewlett-Packard “is imposing new limits on the employment of students and temporary agency workers at factories across China. The move, following recent efforts by Apple to increase scrutiny of student workers, reflects a significant shift in how electronics companies view problematic labor practices in China.”
NEW YORK TIMES

Don’t Make Poison Pills More Deadly  |  The Securities and Exchange Commission should avoid any changes that would make it easier to adopt poison pills that cap ownership at low levels, Lucian A. Bebchuk writes in his column, The Rules.
DealBook Â'

Buffett’s Son Prepares for Role at Berkshire  | 
BLOOMBERG NEWS

INVESTMENT BANKING Â'

Goldman Prepares Fund Business for New Restrictions  |  Traditionally, Goldman Sachs has attracted clients to its private equity funds “with the security blanket that the bank and its partners went along for the same ride,” but with the advent of the Volcker Rule, the firm “likely will have to shrink the size of its own investment in its funds to just 3 percent from as much as 37 percent,” The Wall Street Journal reports.
WALL STREET JOURNAL

Lazard’s Profit Surges as Deal Assignments Pick Up  |  The independent investment bank said on Thursday that its adjusted profit rose to $81.6 million in! the four! th quarter, up from $1.4 million the period a year earlier, as deal-making improved.
DealBook Â'

Among the Fixed-Income Also Rans  |  Credit Suisse’s fourth-quarter results contain bad news for fixed-income wannabes, Dominic Elliott, a columnist at Reuters Breakingviews, writes.
DealBook Â'

Meredith Whitney, Banking Analyst, Is ‘Uninspired’ by Citi’s New C.E.O.  | 
BLOOMBERG NEWS

Deutsche Bank Said to Fire Energy Traders in London  | 
BLOOMBERG NEWS