The Ticker

It took several painful months, but signs are appearing that Mr. Market is finally figuring out what reasonable earnings expectations might actually look like.  After months of continually slashed earnings forecasts across Wall Street, Merrill Lynch says today we're emerging from a long, frustrating stretch where markets were hindered by a large number of "value traps" -- industries that appear undervalued relative to their own average market multiple, but still facing falling prices and downward earnings revisions. Three out of four times, the trapped industry will fail to outperform the market in the subsequent month, Merrill says. When an industry slips into that category, it takes an external catalyst to pull it out.

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Shares of XM Sirius Satellite Radio could be headed for nickel territory today on news that it's preparing to file for bankruptcy. The NYT said yesterday the company is working to prepare a possible filing less than a year after XM Radio and Sirius completed a difficult merger. Still, the threat of a filing could spark a buyout offer says the NYT:

Charles Ergen, who controls a satellite-television empire including the Dish Network Corporation and EchoStar, recently acquired the majority of a $300 million tranche of Sirius debt that matures next Tuesday.

Since the news about the debt purchase emerged, questions have surfaced over whether Mr. Ergen would make a bid to purchase Sirius. The threat of a possible bankruptcy filing could force Mr. Ergen to make a formal offer for the company now if he doesn’t want to go through an auction in bankruptcy court.

It could also compel Mr. Ergen to agree to convert his debt into an ownership stake in Sirius at a higher price than he originally considered.

Bloomberg says the filing pits Echostar's Ergen against Sirius XM CEO Mel Karmazin, who could be the loser if he can't do better than Ergen's offer of support. Sirius XM reportedly rejected a bid from Echostar back in December. Bloomberg highlights the drama:

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There's a pretty hefty sell-off in progress today and the main reason is a lack of clarity in the latest plan to fix the banking sector. Treasury Secretary Tim Geithner outlined his "comprehensive" plan to fix the banks today (full text is here via the WSJ), and all eyes on were on the details. Problem is there weren't that many of them. Below are some key questions he answered regarding the government's latest plan to calm the credit crisis and rescue a badly broken banking sector (and a few parts that are still too vague). Bold is mine:

It's still the banks' fault. From his speech: "Instead of catalyzing recovery, the financial system is working against recovery. And at the same time, the recession is putting greater pressure on banks. This is a dangerous dynamic, and we need to arrest it. It is essential for every American to understand that the battle for economic recovery must be fought on two fronts. We have to both jumpstart job creation and private investment, and we must get credit flowing again to businesses and families."

Stress tests. On banks: "We want their balance sheets cleaner, and stronger. And we are going to help this process by providing a new program of capital support for those institutions which need it. To do this, we are going to bring together the government agencies with authority over our nation’s major banks and initiate a more consistent, realistic, and forward looking assessment about the risk on balance sheets, and we’re going to introduce new measures to improve disclosure. Those institutions that need additional capital will be able to access a new funding mechanism that uses funds from the Treasury as a bridge to private capital. The capital will come with conditions to help ensure that every dollar of assistance is used to generate a level of lending greater than what would have been possible in the absence of government support. And this assistance will come with terms that should encourage the institutions to replace public assistance with private capital as soon as that is possible." So more money and more rules. But what about fixing bank assets?

The Public-Private Investment Fund. This is a new entity that will be charged with figuring out how to value toxic assets on bank balance sheets. The problem is, Geithner offered way too few details on what is still the single biggest problem facing stocks, the economy, and the banking sector. Just saying private banks and public banks will team up doesn't offer any real reason as to why anyone would actually want to buy up bad bank assets. Geithner said on CNBC that overpaying for assets is "something I'm not prepared to do," and using private money would help that problem. But "exploring a range of different structures" for such a plan told Wall Street nothing.  Until we get more here, stocks aren't going to get a break.

Consumer and small biz debt. In a new plan to work with the Federal Reserve, Treasury is offering up a trillion dollars for secondary markets for consumer and small business debt to get credit flowing again. An updated program for supporting the housing market is another helpful chunk. He called getting credit flowing to everyday Americans  "the most important thing we can do" on CNBC after the speech.

It's going to be expensive, no matter what. From the text: "Our obligation is to design the programs so that we are achieving the largest benefit in terms of supporting recovery at least cost to the taxpayer. And we take that obligation extremely seriously. But I want to be candid: this strategy will cost money, involve risk, and take time. As costly as this effort may be, we know that the cost of a complete collapse of our financial system would be incalculable for families, for businesses and for our nation. We will have to adapt our program as conditions change. We will have to try things we’ve never tried before. We will make mistakes. We will go through periods in which things get worse and progress is uneven or interrupted."

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Given the ongoing weakness in stocks right now, it's no surprise that the IPO market is still on the ropes. Ernst & Young took a look at companies still holding out hopes of going public, and finds they're few and far between. Some highlights from its latest U.S. IPO Pipeline study:

• The number of companies remaining in the IPO pipeline dropped to 57 by the end of the fourth quarter, about a 30% decrease from the end of the third quarter.
• Though the number of companies in registration has gone down substantially in the fourth quarter, the total amount of capital companies are seeking to raise decreased by less than 12% from the third quarter. Thus, the average deal size rose to $272.7 million in the fourth quarter, up from $231.4 million in the third quarter.
• In the fourth quarter, 16 companies withdrew or postponed their IPO and one went effective. Another 14 companies were removed from the report because they sat in the pipeline for more than a year.

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