Opening Bell: 2.13.08

Posted by Joe Weisenthal, Feb 13, 2008, 7:04am

leggbuilding.jpgLegg Mason's Unit Increases Countrywide Stake to 14.9% (WSJ)
Legg Mason is making a big arbitrage bet on Countrywide, as it now owns 14.9 percent of the company that may get bought out by Bank of America. Additionally, there's some hope that another bidder may emerge, which Legg believes may happen if Countrywide were to remove a poison pill. All in all, sounds a little risky to us. But, no doubt, Bill Miller is willing to pull out the stops to get back to his old S&P-beating ways.

Venezuelan State Company Stops Sales of Oil to Exxon (Bloomberg)
Is Venezuela freezing oil shipments to Exxon all that big of a deal? Our hunch is no. We can understand why people might think so, but if anything, we suspect that all this whole little episode will do is basically just expose the Chavez regime as a bit of a fraud. An analyst at CERA said the same, that it's all rhetoric, with little real impact likely. Wake us up when some rebels set a pipeline fire in Nigeria.

Delta CEO Waives Merger Compensation (WSJ)
We're always skeptical of airline mergers. That they'll happen and that they'll work if they do. But first they have to happen and it does seem like something is likely to occur soon, although we've been hearing that some big announcement is going to happen "any day now" for like three months. The CEO of Delta has decided to waive pay he'd receive in the event of a merger, which is taken as a sign that Delta is serious about getting a deal done. Perhaps. But why do CEOs get merger pay? Severance pay is one thing. And it's another thing if a merger would results in the CEO getting shown the door. But just as a payment to get a deal done, it seems like one of the more perverse forms of compensation, no?

Writers Vote to End Strike (NYT)
Now this is the real vote that mattered. With 100 percent of the votes counted, 92.5 percent of the writers voted to end the strike. It's not clear who the other 7.5 percent were. Probably the nerdy ones who have run all the regressions on the math and feel like they're getting shafted on digital revenues. Or maybe they're just the hardcore unionites that believe a strike is the soul of the union, the bracing tonic through which it finds its identity.

Yahoo employee Twitters his layoff (BTL)
Yesterday was ax day at Yahoo, as about 1000 folks got laid off. This was expected, and basically had nothing to do with Microsoft's bid for the company. In fact, it was originally announced to get people convinced that Yahoo has taking the hard steps on its own. Anyway, we can't get too excited about Twitter, the hot web2.0 messaging service, but interesting nonetheless to read a guy Twittering the layoff process.

Bank Bailouts: A Billion Here, A Billion There (Infectious Greed)
Interesting chart measuring the percentage of GDP that various bank bailouts have cost. The biggest, Argnentina in 1980-1982, which cost 55 percent of the country's GDP.

the failure of the superdelegates (Org Theory)
For some reason, we can't get as worked up about super delegates as some people. Is there something "undemocratic" about them? Perhaps. But political parties are private entities. Other countries don't have this system. The party elects the standard-bearer, so in essence, it's only super-delegates. The existing system seems like a nice mix. Plus, they only come into play if there's a stalemate, which is incredibly unlikely. If one candidate has a real substantial lead going into the convention, we'd be shocked to see it end up otherwise. In other news, Intrade has Barack Obama at $.75 to win the Dem primary. That's just a couple pennies of where he stood after last night's blowout elections, so despite their lopsided nature, they didn't really reveal new information that wasn't priced in. A little surprising, perhaps, since one of the big stories was his success among Women and Latinos. He's really going to have to break through in Texas or Ohio to punch higher at this point.

Criminalizing Capitalism (Houston's Clear Thinkers)
A good rant about the absurdity of criminalizing capitalism never hurt anyone.

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Posted in: Opening Bell

Comments

Posted by filthymouth, Feb 13, 2008 8:10AM

First thing I'd love to say today is FUCK HUGO CHAVEZ. We can do nicely without imports from Venezuela.....our government has to get off its' ass. Numberous people in the oil know, say we have billions of barrels of oil in the South and Southwest in this country where wells are capped. Maybe one of the Presidential hopefuls can start assuring us that it will start being used.

Posted by , Feb 13, 2008 8:28AM

Your merely pleabian minds can hardly grasp the vastness of Bill Miller and his navel-gazing cohorts at the SantaFe Institute. Who else but he was smart enough to purchase shares of the homebuilder stocks last year, or Countrywide shares in size before its collapse? Who else has been out of the oils for years? The algorithms behind these trades are derived from Mandelbrot sets and polka-dotted swans. Don't trouble your overtaxed craniae.
Leave it to the real smart guys.

Posted by Che, Feb 13, 2008 8:36AM

Chavez is a joke, if he stops supplying oil to the US (his #1 customer), how does he plan on paying for all of his social(ist) programs? The US is one of, if not the only, country in the world which has refineries capable of refining Venezelua's shitty crude. No shipments to US = no oil money = no social programs = no Chavez. Hey, maybe that isn't such a bad idea after all...

Posted by Anonymous, Feb 13, 2008 9:51AM

I read in the press -- this is legit! -- that Hugo Chavez chewed coca leaves in front of the Colombian president when he visited, and Chavez remarked that he does this every morning because the leaves are "stimulating."

Posted by , Feb 13, 2008 9:57AM

@8:36 In a who would blink first contest, I'll bet Chavez would win, given the degree to which Americans are addicted to oil.

Posted by Che, Feb 13, 2008 10:43AM

@9:57,

Granted oil prices would rise, but Venezuela supplies only 10% of America's oil. Not exactly threatening the livelihood of the nation.

And Chave'z popularity is built upon his ability to fund his social(ist) programs, with no money to do that, he quickly loses favor with the people in the barrios.

And, unless I am mistaken, Venezuela is a member of OPEC. How would America's allies in the cartel respond to this wackjob acting unilaterially in cutting off oil shipments to one of the cartel's largest customers. my guess? not very pleasantly...

Posted by Anonymous, Feb 13, 2008 12:36PM

There's a lot of unrest in Venezuela due to Chavez' inability to deliver on his ambitious social programs. I am hoping this guy is going to sink by himself under his considerable weight. If we need someone to say something pre-emptively rude to Chavez, let's see if the King of Spain is available.

Posted by , Feb 13, 2008 12:39PM

@12:36 Or maybe we just just cut back sharply on our oil consumption, say by initiating a big fat carbon tax, which could also go far in paying for infrastructure improvments. It might even help the situation in the Middle East. But wait, that would require sacrifice and backbone, traits that are all to rare among Americans, starting at the top.

Posted by Anonymous, Feb 13, 2008 12:44PM

Hillary has given up on Wisconsin, and her campaign says she "must win" Ohio and Texas. I think Obama will win Ohio. I have no idea how Texas will go. Nearly 50% Latino vote on the Democratic side. But didn't Team Clinton just let go the Latina head of her campaign? I'm undecided about the direction of Texas, but I'm thinking Obama is going to be so strong nationally that the super delegates will go to him long before the Denver convention.

Republican side: What does Huckabee think he is doing? Before long, he's going to really piss off McCain, who is someone better not crossed.

Posted by Bugs Meany, Feb 13, 2008 1:53PM

@12:39

Yes, what a noble sacrifice on your part, calling for a huge tax on all those middle-American, children-having rednecks who have the nerve not to live in Brooklyn.

Posted by Bugs Meany, Feb 13, 2008 1:55PM

@12:39

Yes, what a noble sacrifice on your part, calling for a huge tax on all those middle-American, children-having, SUV-driving rednecks who have the nerve not to live in Brooklyn.

Posted by , Feb 13, 2008 2:04PM

@12:39 here. My sacrifice is that I ride the subway (from UES, not Brooklyn). And that sacrifice is magnified by the fact that its badly in need of capital improvments. The rednecks, on the other hand, are consuming gas like mad because its significantly underpriced. The WSJ of all places reported recently that the military costs alone associated with defending our sources of oil would justify taxes of close to $2 per gallon.

Posted by , Feb 13, 2008 2:12PM

A carbon tax wouldn't be as regressive on those poor rednecks as you think. They would probably cut back a little on oil consumption, which would save them money. Plus, that cutback would probably lead to a price decline, resulting in an additional savings.

Posted by Mr. Mullet, Feb 13, 2008 3:02PM

The rednecks would just reduce the amount of time they spend offroading in 4wd pieces of shit that get about 12 mpg.

Oil prices go down, less environmental damage from unnessary offroading, less car accidents when a drunken hick gets behind the wheel and drives through mud trails.

Posted by Anonymous, Feb 13, 2008 4:38PM

A carbon tax sure is an indirect way to punish Chavez.

How are people defining "rednecks"? Everyone outside of NYC proper? Adequate mass transit doesn't exist except in NYC. A few cities have some mass transit capability, but their capability isn't as extensive as New York's.

I'm not sure that a huge percentage of the American people operate off road vehicles. If gas prices went up another $2, people would have to cut whatever discretionary spending is left in their budgets. After that category is exhausted, then they would have to cut into necessities. Ordinary people have to get to work.

Posted by Johnny Canuck, Feb 13, 2008 8:01PM

First, I agree with the sentiment, "Fuck Hugo Chavez."

Second, I'd like to try munching on some coca leaves or make some coca tea before work. I already drink coffee, so what's the difference? After all, are strippers and mini-ballers having any trouble finding cocaine? Are crack addicts having any trouble finding a few rocks of crack?

Third, isn't refusing to sell to Exxon a bit like squeezing a balloon? If Chavez won't sell to the US, he'll still sell his oil to someone. Then, whoever buys Venezuela's oil won't be out buying Saudi oil or Canadian oil or Russian oil.

It's not about who sells to whom, it's about total global oil production. Otherwise, it's just the usual Chavez demagoguery.

Posted by , Feb 13, 2008 9:51PM

@4:38 Boo hoo... or maybe they would just drive less or buy smaller cars.

Posted by Anonymous, Feb 14, 2008 12:40AM

@ 9:51 pm. The American consumer has already voted for smaller, more fuel-efficient cars. That's why Japanese cars are in ascendancy over Detroit. Seen an American V-8 on the road lately?

Unfortunately, there doesn't seem to be a supply of even better fuel-efficient cars in the pipeline. The market doesn't need to be created; it's there.

Unfortunately, there seems to be a little more to engineering and building more fuel-efficient cars than you imagine. Detroit is screaming about fuel efficiency standards going into effect that have been in the works for a long time.

"Recreational" driving is already on the decline due to gas prices. If someone has a fixed commute, do you suggest cutting down on showing up for work?

How do you suggest people get around in the vast rural areas of the Midwest and West?

I favor energy conservation, but don't pretend to have all the answers. I don't think a $2 a gallon across-the-board carbon tax is like a lot of sales taxes: regressive.

Posted by Anonymous, Feb 14, 2008 12:44AM

The verb "don't" is a typo in the last sentence of the post @ 12:40 am. It shouldn't be there.

Posted by , Feb 14, 2008 9:26AM

12:40 Thanks for your thoughtful post, but your underlying assumptions are basically wrong. You feel that American way of life - which revolves around cheep fuel - is just fine. In reality though, people don't need to live in exurbs and rural areas, miles and miles from their jobs. If they prefer that, fine, but don't make the rest of us subsidize the fuel needed to support that lifestyle choice. And by subsidize, I mean allow gas to be priced at far less than it should be given envirnonmental and geopolitical realitites.

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