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

• Altria Group Inc. (NYSE: MO) Q3 earnings beat by a penny but sales fell short of expectations; shares fell.
• AMR Corp. (NYSE: AMR) reported a Q3 net loss and plunging revenue but also raised $4 billion in cash.
• BB&T Corp. (NYSE: BBT) topped Q3 earnings expectations but said bad-loan provisions nearly doubled.
• Boeing Co. (NYSE: BA) missed estimates and posted a Q3 loss due to delays for a couple of jet products.
• Capital One Financial Corp. (NYSE: COF) shares rose after it reported better-than-expected Q3 numbers.
• Coca-Cola Co. (NYSE: KO) posted a better-than-expected Q3 profit but sales fell short, and shares fell.

A report today in the New York Post indicates that Western Asset Management Co., a unit of Legg Mason (NYSE: LM), is one of several institutional investors hatching a plan to absorb bad assets from banks. The Post says that LM's unit is "among a growing group of big-name investors looking at establishing vehicles similar to real-estate investment trusts that would sell shares to the public and use the proceeds to buy troubled residential mortgages and commercial real estate."

Other interested parties include Pacific Investment Management Co., as well as billionaire Gerald J. Ford, says the Post. The creation of an REIT-like entity to purchase undervalued mortgage assets would fall under the Public-Private Investment Program described by Treasury Secretary Timothy Geithner earlier this year as part of the government's broader bailout initiative.

Analyst upgrades:

• Baird upgraded Regal-Beloit (NYSE: RBC) to Outperform from Neutral based on valuation and growth expectations.
• Black & Decker (NYSE: BDK) and Lennar (NYSE: LEN) were upgraded to Buy from Neutral at UBS based on valuation.
• Kroger (NYSE: KR) and Public Storage (NYSE: PSA) were added to Goldman's Conviction Buy List.
• CIBC upgraded Biovail (NYSE: BVF) to Sector Performer from Sector Underperformer.
• Abercrombie & Fitch (NYSE: ANF) was raised to Neutral from Underperform at Cowen.

• Merrill downgraded Campbell Soup (NYSE: CPB) to Neutral from Buy and expects marketing and promotional spending to limit earnings growth in 2009 and 2010. The firm lowered their target to $35 from $42.
• Mechel Steel (NYSE: MTL) was cut to Underweight from Equal Weight at Morgan Stanley to reflect declining coal demand.
  
• Friedman Billings downgraded shares of Legg Mason (NYSE: LM) to Underperform from Market Perform on liquidity concerns given the Legg Mason's leveraged balance sheet and falling EBITDA. The firm lowered their target to $7 from $11.

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

• Alcatel-Lucent (NYSE: ALU) reported a narrower Q3 net loss and reaffirmed its outlook.
• Barclays (NYSE: BCS) earnings and dividend prospects resulted in an analyst's downgrade.
• Burger King Holdings Inc. (NYSE: BKC) posted its 19th straight quarter of positive growth.
• Choice Hotels International Inc. (NYSE: CHH) better-than-expected Q3 report led to an upgrade.
• Comcast Corp. (NASDAQ: CMCSA) reported strong Q3 numbers and maintained its revenue outlook.
• DreamWorks Animation SKG Inc. (NYSE: DWA) better-than-expected Q3 results driven by Kung Fu Panda.
• Exxon Mobil Corp. (NYSE: XOM) reported another record profit in Q3 driven by record high fuel prices.
• Garmin Ltd. (NASDAQ: GRMN) reported a better-than-expected Q3 profit and offered guidance.
• Hercules Inc. (NYSE: HPC) posted lower Q3 earnings and anounced [regulatory] approval of its buyout.
• Janus Capital Group Inc. (NYSE: JNS) weaker-than-expected results led to an analyst's downgrade.
• Legg Mason Inc. (NYSE: LM) swung to a smaller-than-expected Q2 net loss and shares soared.
• Motorola Inc. (NYSE: MOT) dismal Q3 results managed to beat low earnings expectations.
• Office Depot (NYSE: ODP) Q3 results included lower revenue and a net loss due to economic conditions.
• Qwest Communications International Inc. (NYSE: Q) unimpressive Q3 numbers fell short of estimates.
• Sun Microsystems (NASDAQ: JAVA) swung to a greater-than-expected net loss due in part to competition.
• Texas Roadhouse Inc. (NASDAQ: TXRH) missed Q3 estimates and warned of flat full-year earnings.
• Valero Energy Corp. (NYSE: VLO) strong Q3 results included a gain from a sale of a refinery.
• Visa Inc. (NYSE: V) beat Q4 earnings expectations after adjustment for litigation-related charges.
• Whirlpool Corp. (NYSE: WHR) fell short of revenue estimates and announced job cuts.

The shares of American International Group (NYSE: AIG) soared nearly 23% Monday and are rising fast again today on news that shareholders may band together to prevent the Federal Reserve from snapping up an 80% stake in the insurance firm. Apparently, major investors (which could include Bill Miller of Legg Mason) are hoping that the quick sale of assets will raise enough capital to pay off the Fed's $85 billion loan. However, AIG chief Edward Liddy seemed to put the kibosh on this speculation last night in a CNBC interview.

Liddy told the cable news channel he thinks the government's bailout plan is an "excellent idea," and added that he doesn't consider the Fed's intervention as a step toward nationalization. While the CEO believes that the government's loan will be fully repaid, he noted that a shareholder rescue isn't the most likely outcome. Instead, Liddy plans to prepare a list of assets for sale within seven to ten days, in hopes that the divestments will generate enough cash to stave off the feds at the door.

So, what's for sale at AIG? Well, Liddy made it clear that the firm's Asian operations are both "sacrosanct" and "unassailable." The chief executive also emphasized that he wants his company to emerge on the other side of this crisis as a leaner and more resilient version of itself. "It will look a lot like it did prior to 1998-1999, with less reliance on the financial services side," he told CNBC, noting that AIG will instead focus on its core business of property-casualty insurance.

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

• Boeing Co. (NYSE: BA) earnings prospects may have encouraged the machinist union to strike.
• Ciena Corp. (NASDAQ: CIEN) Q3 results and weak guidance led shares to a new 52-week low.
• Corning Inc. (NYSE: GLW) lowered its Q3 earnings guidance below previous and analysts' forecasts.
• Dollar Financial Corp. (NASDAQ: DLLR) beat Q4 estimates and posted record 2008 results.
• Ericsson Telephone Co. (NASDAQ: ERIC) was downgraded because it could miss Q3 earnings expectations.
• Esterline Technologies (NYSE: ESL) topped Q3 expectations due to robust aerospace and defense markets.
• Joy Global Inc. (NASDAQ: JOYG) posted strong Q3 results due to a sharp increase in orders.
• Kraft Foods Inc. (NYSE: KFT) backed away somewhat from its previous 2008 earnings guidance.
• Legg Mason Inc. (NYSE: LM) earnings prospects for the next several quarters led to an analyst downgrade.
• MEMC Electronic Materials Inc. (NYSE: WFR) mid quarter update warned of declining demand for chips.
• Navistar International Corp. (NYSE: NAV) was upgraded following a strong Q3 report.
• New York Times Co. (NYSE: NYT) ongoing losses haven't diminished Rupert Murdoch's interest in it.
• Nokia Corp. (NYSE: NOK) warned that it would miss earnings estimates due in part to weak sales.
• Shanda Interactive Entertainment Ltd. (NASDAQ: SNDA) better-than-expected Q2 led to an analyst upgrade.
• Staples Inc. (NASDAQ: SPLS) Q2 earnings slipped while revenues rose, beating expectations.
• Take-Two Interactive Software Inc. (NASDAQ: TTWO) Q3 results soared but cut its Q4 guidance.
• Tenet Healthcare Corp. (NYSE: THC) was upgraded on its prospects for beating expectations.
• Terex Corp. (NYSE: TEX) warned that earnings for Q3 and Q4 would be lower than estimates.
• Tiffany & Co. (NYSE: TIF) posted better-than-expected Q2 results and offered full-year guidance.
• Toll Brothers Inc. (NYSE: TOL) reported its fourth straight quarterly loss, but it was smaller than expected.

Also, Jim Cramer discusses a decline in earnings resulting from a collapse of oil and oil services.

Upcoming quarterly reports include Korn/Ferry (NYSE: KFY), Pep Boys (NYSE: PBY), Campbell Soup (NYSE: CPB), Krispy Kreme (NYSE: KKD), and Lululemon Athletica (NASDAQ: LULU).

Visit AOL Money & Finance for more earnings coverage.

I am not sure that Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) will make it through the month as public companies. Barron's quoted an anonymous senior official -- who sounds an awful lot like Hank Paulson to me -- that unless Fannie and Freddie could raise at least $10 billion each, the government would bail them out while wiping out common shareholders and eliminating the preferred dividend. Since then, investors have been dumping shares of Fannie and Freddie like there's no tomorrow.

Who wins and who loses if Fannie and Freddie's shareholders are wiped out? As I said on CNBC's Power Lunch this afternoon, the winners are investors who shorted Fannie and Freddie years ago and are now reaping enormous profits. I also think that some Wall Street investment banks will win big as they get the job of selling off Fannie and Freddie's pieces. The losers are their biggest common and preferred shareholders -- including some well known mutual funds.

The winners are:

• Jim Rogers, Rogers Holdings - Rogers originally shorted Freddie and Fannie in March 2006 and appeared on Bloomberg on November 20, 2007 to discuss why he did it and where he thought their stocks would go.
• Doug Noland, Prudent Bear - As I posted, since the late 1990s, Noland's research has concluded that Freddie and Fannie would "shudder" when the US credit bubble eventually burst. Noland has profited from the short bets he made -- but he says it is emotionally painful to watch them fail.

Bill Miller, Legg Mason Value Trust's manager, used to be a good investor but he's outlived his usefulness in that role. Legg Mason (NYSE: LM) has kept him on for too long and if it doesn't give him the hook fast, he will sink the company. The problem? Miller's success has gone to his head and he can't adapt.

This phenomenon is quite common. It's called confirmation bias -- the tendency of decision-makers to seek out information that reinforces their views of the world and to reject information that challenges those views. This is particularly common among those who have been successful. They think that they have figured out a winning formula and when it stops working, they blame everyone but themselves.

This came to mind as I read a CNNMoney story on how Miller's fund has lost 34% of its value since last July. Miller had been famous for beating the S&P 500 every year between 1990 and 2005. But his methods have failed him since. And investors have yanked $2.4 billion from Legg Mason which CNNMoney notes, reported a second quarter loss last week.

Carl Icahn just got more bad news. His bid for Yahoo! (NASDAQ: YHOO) seems to be losing it momentum, and it should. Legg Mason, which owns 4.4% of the portal company, will support the current board.

According to The Wall Street Journal (subscription required), "We believe the current board acted with care and diligence when evaluating Microsoft's offers," Legg Mason Chairman Bill Miller said.

Other large investors may decide to back the status quo ahead of the Yahoo! Annual Meeting on August 1.

Icahn has made two significant mistakes. The first is that he overplayed his hand with Microsoft (NASDAQ: MSFT) by saying that he had more support from Steve Ballmer for a deal to takeover Yahoo!'s search business than he actually had.

The more profound problem is the Icahn has not taken the time or the effort to show Yahoo! shareholders how he would operate the company if he cannot strike a deal with Redmond. In essence, he has not made it clear how he can make Yahoo!'s shares rise from their current level if the company has to be run as a standalone business.

Icahn will lose his proxy fight for Yahoo!. He has not offered anything beyond a break-up or M&A event. Why would anyone support something so thin?

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

Someone lost a lost of money as the prices of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) hit multiyear lows on news that several analysts believed the federal government would have to take the two companies over. In all likelihood, the move would wipe out common shareholder.

Famous stock-picker Bill Miller of Legg Mason (NYSE: LM) may have been one of the casualties. According to work done by Reuters, Legg Mason, Capital Group, AllianceBerstein (NYSE: AB) and Fidelity lost a total of $4 billion on the mortgage company stocks over the course of last week's trading.

While all fund companies may have been hit equally, which no one can know exactly at this point, Miller's reputation as a leading fund manager is being devastated. After years as one of the most successful portfolio managers in the country, his fund has underperformed the S&P for two years.

It looks like Miller is going for a third.

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

Here is a novel idea. Big Yahoo! (NASDAQ: YHOO) shareholder Legg Mason thinks more investors would support Carl Icahn's effort to control the portal company if the raider will not sell out to Microsoft or anyone else for under $33. At $32.99 it's no deal.

Legg Mason's Bill Miller told Reuters, "The difficulty with Icahn is he'd have more shareholder support if he would say he wouldn't sell the company for less than $33."

Fair enough. One of the problems with hooking up with raiders is that they often fail. Microsoft (NASDAQ: MSFT) has already indicated it would pay $33 for Yahoo!. Why should shareholder take less?

Miller may be thinking of Icahn's recent deals to pressure Motorola (NYSE: MOT) and Blockbuster (NYSE: BBI) to improve "shareholder value". Neither one of those have done well. Investors who followed Icahn in have lost plenty of money.

Legg Mason's comment makes sense. "Put up or shut up:"

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

MAJOR PAPERS:

• Investors are taking their money out of hedge funds more now that at any time over the past 10 years, according to the Wall Street Journal. Firms are bracing for the end of June when the next big wave will hit.
• First it was a demand for management changes, and now shareholders, including one time director Eli Broad and fund managers Shelby Davis of Davis Selected Advisors and Bill Miller of Legg Mason Inc (NYSE: LM), are again upset with American International Group Inc (NYSE: AIG) and want changes in the boardroom as well, the Wall Street Journal reported.
• The Wall Street Journal reported that Citigroup Incorporated (NYSE: C) will close Old Lane Partners, a hedge fund co-founded by CEO Vikram Pandit.

• Spotlight Capital is increasing pressure on Chico's FAS Inc (NYSE: CHS) and said it has been in touch with 25 major shareholders in order to oust CEO Scott Edmonds and unseat board member John Burden, who are accused of having a conflict of interest, the New York Post reported.

• Advanced Micro Devices Inc (NYSE: AMD) denied reports certain of its new dual-core chip, code-named Kuma, have been canceled, according to CNet. A spokesman for the company said that the launch of Kuma, scheduled for the second half of 2008, remains on track.

Legg Mason Value Trust manager Bill Miller built his reputation -- and the fortunes of his investors -- by beating the benchmark S&P 500 for 15 years, a streak that ended in 2006.

But since that run ended, the fund has struggled mightily with bad bets on companies like Countrywide Financial (NYSE: CFC), Bear Stearns (NYSE: BSC), and Yahoo! (NASDAQ: YHOO). Now Miller's investors are questioning his philosophy, and so is is the legend himself.

A big part of Miller's brilliant track record was his belief in focus investing -- concentrating his bets on a few stocks rather than a bunch. The Legg Mason Value Trust holds just 35 stocks. But according to the New York Times, that strategy is now being reconsidered. Miller said that "The question we are asking ourselves is: Should we think more broadly now about probability, about high-impact events and protecting against them by having broader exposure to the market?"

I seriously doubt that that's the right strategy. Miller is universally acknowledged to be a great stock picker -- diluting his influence by building a portfolio consisting of his 200 best ideas instead of his 35 best sounds like a sure road to mediocrity.

The larger point is this: After a 15-year streak of greatness, Miller has hit a rough patch. Two years of underperformance doesn't change 15 years of greatness, and this is a bad time to consider changing the strategy that led to his track record.

The elbows are getting sharp in the corners and soon the battle lines over the Microsoft (NASDAQ: MSFT) fight for Yahoo! (NASDAQ: YHOO) will become more evident to the public. Legg Mason's big equity fund, lead by disgraced stock guru Bill Miller, is prepared to support an effort by Yahoo! to remain independent, should Microsoft lower its offer, according to The Wall Street Journal.

Miller's performance has been so hideous over the last year that he should keep his opinions to himself.

What Miller is not acknowledging is that Microsoft may simply walk away if it cannot get the support of Yahoo!'s shareholders and board. The portal's stock was below $20 and many predict it could go back there if Microsoft withdraws its offer. The eventual price depends on Yahoo!'s first quarter performance, but at this point, Redmond thinks it has the best deal -- perhaps the only deal -- in town.

The conventional wisdom is that if Microsoft goes away, it may take years for Yahoo! to get its price back above $30, if it gets there at all. Yahoo! may be underestimating how bad the current recession could get. If so, it may look back at the current offer and rue the day that it decided to fight a takeover.

At the very least, with Miller's track record, he is hardly a bell-weather for what Yahoo! should do.

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

It's been a tough first four months of the year for Bill Miller of the Legg Mason Value Trust (LMVTX), famous for his 15-year run beating the S&P 500. Even after a 4.12% bounce in his fund's net asset value on Thursday, he's down 14.95% for the year. One major culprit? His stake in Bear Stearns (NYSE: BSC) that was once worth more than $200 million, making the fund one of the firm's largest shareholders.

According to the Wall Street Journal (subscription required), Miller's performance reminds him of his tough run that began the 1990s: "Back then, a similar crisis was unfolding in financial markets and Mr. Miller eventually swooped in to buy money-center banks like Chase Manhattan and Citicorp that he thought were underpriced, as well as insurance companies and mortgage lenders. Financials made up as much as 45% of Mr. Miller's portfolio by the mid-1990s, and helped drive his 15-year winning streak as they rallied over the years."

Mr. Miller told his fund's shareholders that "the past two years are a lot like 1989 and 1990," and there's a "reasonable probability the next few years will look like what followed those years."

Maybe so. But investors should be wary of the fact that a big part of Miller's outperformance stemmed from his exposure to financial stocks and now that same exposure is dragging his fund into the lowest echelons of mutual fund performance.

Is the Legg Mason Value Trust just a glorified bet on the bounce back in financials? If so, investors may want to tread carefully, as Miller has been wrong about the sector for awhile.