Skip to main content

Opening Bell: 3.6.06

NYBOT Board To Discuss Demutualizing (Reuters)
No, really, you don't say. The New York Board Of Trade is considering a change to their structure, and may become a for-profit enterprise. Some are whispering the greatest three words known to man: I P O. What's great is that a seat on the exchange sold for $875,000 yesterday (a new record) almost $150,000 higher than the previous record, 2 weeks earlier. Whoever sold the last one has to be kicking himself. Then again, all the seat holders must have the big $1,000,000 on their minds. Is there an exchange for seats themselves? Is there a company offering seat holders hedges/insurance in case the IPO doesn't come through as planned. C'mon, these are some hot markets to exploit. More: Because the day wouldn't be complete without at least two stock exchange bits of news, the Scandinavian Stock Exchange, OMX, is looking to hook up with the LSE.
A Business Traveler's Odyssey (AP)
This is bound to be a classic tale of the 21st century businessman; 10 years from now they'll be debating whether it was apocryphal or not. Recently, an Intel employee, intending to fly to Taiwan, mistakenly booked a flight to the remote Chinese industrial city Taiyuan, near the border of Mongolia. Once there he found himself with no money, no place to stay, taking abuse from strangers, fighting his way out of a brothel, and desperately trying to make an international phone call to his wife. Hopefully they'll turn his ordeal into a movie.
Japan Post to Be Privatized (BusinessWeek)
We've seen headlines like this before, so we won't hold our breath, but if the Japan Post goes public, it will be the granddaddy of all privatizations. Privatizing The Post would be on the order of privatizing Social Security, Medicare, The FDIC, and the Parks Service all at once, and it's long been a priority of Japanese PM Koizumi. The institution's $1.7 tln holdings had been predominantly invested in government bonds, which haven't paid a whole lot over the years. The process will take place over several years through 2017, long enough time for a recession to freak politicians out and demand the process be halted, but if it goes through, one of the winners will be Goldman Sachs, one of the few foreign companies to have a role in its privatization.

A Second Loss for Merck Over Vioxx (NYT)
Wanted to hold off on this article, since apparently the reporter didn't have time to get quotes from the jurors. Historically they've been on the order of "we got confused when the Merck Lawyer started talking all that science stuff... it was totally rude to talk over our heads like that, and the man's widow seemed so nice". The blow for Merck was not in the loss itself, but in the fact that the plaintiffs weren't even dead, showing that prosecutors don't even need to trot out lonely widows to secure a win. Actually, only one of the plaintiffs was eligible for punitive compensation, the other will only collect $135, three times the cost he spent on Vioxx. He had only been taking the drug for 2 months prior to his heart attack. Still, it's a 10 times better payout than most plaintiffs in class-action suits get. Wonder how much his lawyer is gonna take.
Ex-Enron CEO Readies for the Stand (Washington Post)
When was the last time you saw a defendant take the stand?! With any luck, former CEO Jeff Skilling will call the prosecutor an asshole, as he once did to an analyst on a conference call who had the temerity to ask why Enron neither produced a balance sheet nor a cash flow statement. At Enron, it was just about the bottom line. As usual, check out Houston's Clear Thinkers for the blow-by-blow. Should Be Fun.
(Air)Born To Be wild: Southwest, Breaking Its Own Rules (Airline Business)
Does anyone even think of Southwest as a discount carrier anymore? Discount carriers are supposed to have XM radio, Satellite TV, Terra Chips, and leather seats. Oh, and they're supposed to have low fares. Now, Southwest is changing structurally to resemble more and more an incumbent airline, by moving into more major airports, challenging the other incumbents, and even cannibalizing their existing positions, by going to two airports in once city. Where would Southwest by if not for their vaunted fuel hedges? Yes, they made a great call by hedging fuel before the run started happening, but that was basically one really lucky trade. Southwest has no structural advantage that will allow it to keep making brilliant oil bets. Once the hedges expire, as they'll start to soon, it should be interesting to see what happens to this aging flyer, and the industry in general.
Ford CEO dismisses bankruptcy as option (Dow Jones Newswire)
It's not clear what the point of these articles is. Of course he's going to deny that bankruptcy is a possibility, just as the GM's Rick Wagoner would do, and just as Lay and Skilling would have done a week before they kicked the can. He noted, in an acceptance speech for the Automobile Industry Action Group Executive of the Year, that Ford is doing really well around the globe... except for the US. Just a little problem that he promises they solve.
Why India Is Crazy About Single-Stock Futures (Bloomberg)
Listen up, because this could be coming here soon, if some on Wall St. have their way. So why is India crazy about them? It's all about the L-word, leverage. Even the poor can get leveraged, and make short-side bets on stocks, without having to pay massive gains-killing interest rates. Already Mumbai is becoming a world financial center, on the volume of these trades alone, which are six times that in Europe.
Crackberries For the Masses (BusinessWeek)
Sorry, we know that Crackberry jokes are sooo 2004. Still, Yahoo and Research In Motion unveiled a deal to allow regular people with an email address to exploit Blackberry's fabulous email-syncing technology, which heretofore had been limited to expensive corporate-grade services. It's interesting that they elected to go with Yahoo, as opposed to the smaller but hipper GMail. It's probably not an exclusive deal, especially if the company makes a serious drive to become a consumer gadget.
Are Commodities Futures Too Risky for Your Portfolio? Hogwash! (Knowledge@Wharton)
Cool article on one of the first comprehensive academic studies into long-term commodity returns. Surprise, surprise, they're not really all that risky, and in fact serve as a valuable hedge in a stock portfolio. In fact, the futures definitely offer a risk premium, like stocks do, something that hadn't been thought to exist: The study found that investments in this futures index would have performed far better than investments in the commodities themselves, bought on the spot market. That extra return reflected the risk premium. Over the entire period, returns, with compounding, averaged 9.98% a year for the futures investment, versus 7.66% for an investment in the spot market. Both beat inflation, which averaged 4.13% a year.