pgr

MAJOR PAPERS:

• Madonna, the original material girl, is signing a 10-year $120M deal with concert promoter Live Nation (NYSE: LYV), leaving Warner Music Group (NYSE: WMG) in her wake, reported the Wall Street Journal.
• According to the Wall Street Journal's "Heard on the Street" column, Progressive Corporation (NYSE: PGR) is struggling due to competitors' pricing, safer cars, and a struggling economy, to name a few factors.
• The Financial Times reported that General Electric Company (NYSE: GE) will decide whether to sell its 80% stake in NBC Universal after the Beijing Olympics in August 2008, according to sources.
• Tenaris (NYSE: TS), the maker of steel pipes for oil and gas exploration, has ruled out any possible sale of itself to ArcelorMittal (NYSE: MT) , the world's biggest steel producer, reported the Financial Times.

OTHER PAPERS:

• The New York Post reported that UBS AG (NYSE: UBS) has fired David Martin, its head of interest-rate trading, and James Stehli, the head of its collateralized debt obligation unit, due to the fallout from the mortgage meltdown.
• BP PLC (NYSE: BP) CEO Tony Hayward will today unveil plans to reduce bureaucracy and duplication of management at the oil giant, reported the Telegraph.

MOST NOTEWORTHY: REITs, Business Objects, Allstate Corp and P&C Insurance were today's noteworthy downgrades:

• Deutsche Bank downgraded REITs AvalonBay (NYSE: AVB), Boston Properties (NYSE: BXP), Health Care REIT (NYSE: HCN), Kimco (NYSE: KIM) and Public Storage (NYSE: PSA) to Hold from Buy on valuation following the recent share appreciation.
  
• Business Objects (NASDAQ: BOBJ) was downgraded to Neutral from Outperform at Baird following its acquisition by SAP AG (NYSE: SAP).
  
• Wachovia downgraded Allstate Corporation (NYSE: ALL) to Market Perform from Outperform and P&C Insurance (NYSE: PGR) citing deteriorating fundamentals in personal lines.

OTHER DOWNGRADES:

• UBS downgraded BEA Systems (NASDAQ: BEAS) to Neutral from Buy.
  
• JP Morgan downgraded Merrill Lynch (NYSE: MER) to Neutral from Outperform.
  
• Sealy Corporation (NYSE: ZZ) was downgraded to Neutral from Buy at Banc of America.
  
• Friedman Billings downgraded technology stocks, lowering ASE Test Limited (NASDAQ: ASTSF), ASML Holding (NASDAQ: ASML), KLA-Tencor (NASDAQ: KLAC) and Rudolph Technologies (NASDAQ: RTEC) to Market Perform from Outperform.

In his second quarter letter to The Progressive Corporation (NYSE: PGR) shareholders, CEO Glenn Renwick admits the quarter was weak, the numbers are not where the company wants them, but there are signs of progress slowly emerging. Might as well get the bad news all out on the table so shareholders know what they are dealing with. One has to admire the CEO's honesty.

Progressive Corp. of Ohio is an insurance company that writes policies for personal and commercial drivers, as well as policies for motorcycles and personal watercraft for recreational use. Consumers might recognize Progressive from its commercials in which it provides a potential customer not only with its own rates but also the rates of competitors and admits that sometimes Progressive is not the cheapest but does provide superior claims service. Turns out, lots of customers really do want the cheapest coverage possible.

Thus, Progressive's net income declined 29% in the second quarter because the company wrote fewer policies and had to discount premium prices on policies it did write. CEO Renwick believes most of the discounting has already been done and he looks for premiums to rise although Progressive remains very sensitive to price comparisons with its competitors.

MOST NOTEWORTHY: Continental Airlines, Inc (CAL), Molson Coors Brewing Co (TAP), Watsco, Inc (WSO), K-V Pharmaceutical Co (KV.A), Progressive Corp (PGR) and Color Kinetics (CLRK) were today's noteworthy downgrades:

• Goldman downgraded shares of Continental Airlines, Inc (NYSE: CAL) to Neutral from Buy on valuation, higher oil prices and a weak domestic market.

• Goldman also downgraded Molson Coors Brewing Co (NYSE: TAP) to Neutral from Buy based on the increase in analyst estimates, valuation and the potential for margin pressure in the summer.

• BB&T cut Watsco, Inc (NYSE: WSO) to Hold from Buy based on valuation and catalysts that are already reflected in the share price.

• Roth Capital downgraded shares of K-V Pharmaceutical Co (NYSE: KV.A) to Hold from Buy, telling clients they have learned that Par Pharmaceuticals Cos (PRX) has launched generics of 50, 100 and 200mg Toprol-XL. The firm expects a material impact to KV's 100 and 200mg strength generics.

• Stifel expects investor enthusiasm regarding Progressive's Corp (NYSE: PGR) recapitalization plan to fade as underwriting fundamentals deteriorate and cut shares to Sell from Hold.

• Color Kinetics (NASDAQ: CLRK) was downgraded to Hold from Sell at Needham on valuation...

OTHER DOWNGRADES:

• Citigroup cut The Phoenix Co's (NYSE: PNX) to Hold from Buy.

• KeyBank downgraded Lubrizol Corp (NYSE: LZ) to Hold from Buy.

• Goldcorp Inc (NYSE: GG) and Freeport-McMoRan Copper & Gold Inc (NYSE: FCX) were downgraded to Market Perform from Outperform at BMO Capital.

• Susquehanna downgraded Build-A-Bear Workshop, Inc (NYSE: BBW) to Neutral from Positive.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

America is a "sue-happy" country. Where else can you sue the dry cleaners for $54 million because they lost your Hickey Freeman pants. You think I am joking; but this is a case of life being stranger than fiction. A Washington DC judge (who in my opinion should know better) is suing a dry cleaners that lost his pair of pants.

For a moment last week my trust in the American legal system began to fail as Paris Hilton, heiress of Hilton Hotels (NYSE: HLT) fortune, spent a heart-wrenching three days in jail before being released by the sheriff for "medical reasons." Then suddenly my faith was restored as the judge sent her back to jail.

Well it didn't last long. It seems this week a pair of lost pants is worth crying over -- and $54 million. I guess America is land of the free and home of too many lawyers. Maybe this is why I respect Vice President Cheney: I mean, we all talk about the problem with lawyers, but at least he shot one.

When Warren Buffett announced he wanted to use between $40 and $60 billion to buy a company several days ago, picking a target for the billionairest of all billionaires became the favorite pastime of financial writers everywhere -- and our bloggers were as eager as anyone else to come up with just the thing for the guy who already has everything (and everything, in this case, includes bunches of shares of companies as diverse as dull sheetrock manufacturer USG Corp. (NYSE: USG) to hip shoe company Nike Inc. (NYSE: NKE)).

Of course, Buffett's needs are unique. First of all, the company has to be both big and a good value -- no 80x P/E multiples for Warren. It has to be a relatively simple business (I'm thinking nanotech is out), have a good management team and no dark and dirty secrets (so sub-prime lenders are probably off the list). Finally, the company should have solid, long-term competitive advantages.

Sheldon Liber suggests a couple that might make the grade: Allstate Corp. (NYSE: ALL), the insurance company, which at about $38 billion in market capitalization and a 7.8x P/E ratio fits both the "big" and "cheap" qualifiers. Plus, we all know that Warren Buffett loves insurance companies, and given its retail approach, it's not much of a competitor with longterm portfolio company GEICO. Emerson Electric (NYSE: EMR) also seems a good candidate with its $37 billion market cap and 19x P/E ratio -- but is it simple enough? Its business is, according to Hoover's, making "a host of electrical, electromechanical, and electronic products, many of which are used to control gases, liquids, and electricity." Hmmm.

When Gary Sattler suggests Warren might buy General Electric Co. (NYSE: GE)'s plastics division, it's a good concept (simple, well-managed) but the price is way too low at around $10-12 billion. A commenter, however, brings up a good replacement in Lowe's Companies Inc. (NYSE: LOW); it has a $47 billion market cap and a reasonable P/E ratio of 15.5x. What's more, it has none of the bad-management baggage of competitor Home Depot Inc. (NYSE: HD). Does it have a "moat," though? I suppose that's a question for Warren. He does own some of each company, meaning that he's already emotionally invested in the sector (a plus) although it's obvious from our near-tie in the Battle of the Brands that neither holds a substantial consumer-facing edge competitively.