Corporate-Governance Concerns Are Spreading (WSJ)
Alan Murray notes the winds of change with respect to corporate governance, as more and more institutions place emphasis on it. He's probably right that companies would be wise to pay heed to the corporate governance-nerds and have independent directors. From an investor's standpoint, could there be an arbitrage opportunity? If some of the really big money (like CALPERS) is making investment decisions based on corporate governance, they're probably overlooking some fine companies that don't meet their standards. Yes, we're thinking Dealbreaker hedge fund; long the bad boys, short the choir boys.
Nasdaq Buys Stake In LSE (Guardian)
They don't call The NASD (Nasty) for nothing. The American exchange quietly bought up 15% of the LSE on the open market. While many stock exchanges just talk about merging with each other, the Nasdaq actually goes ahead and does it, giving it a big leg up next time talks erupt about the fate of the LSE.
Wall St. Buying Hollywood (Hollywood Reporter) (via Paul Kedrosky)
Sure, there's a million jokes and clever lines to be said about Wall St. getting into the movie finance business. Just be cause we didn't write them down, doesn't mean we didn't think of them. Suffice to say, many big banks and hedge funds are funding projects in some manner or another. Some might see this as yet another example of Wall St.'s love with exotic investments these days (strange private equity deals, hedge funds, etc.), but it might be good timing. There's the perception that Hollywood is a dying industry, no longer able to compete with new media. Much of this is probably based on recent box office receipts and reading too many blogs. In fact, the industry has gone through many slumps, much of it being due to Fortuna's cruel hand more than any micro-economic factors. Here's a solid starter to check out if you're looking for a good discussion on the economics of Hollywood.
Danielle DiMartino: Real estate indicator gets notice (via Matrix)
One of the problems, these days, is that everyone gets to be an economist. All you have to do is look in the paper, check out the latest trade deficit statistics, and declare that the biggest threat to America is deflation. Either things are a bit more complex that, or it's really simple and obvious that the end times are nigh. There isn't much in between. Danielle DiMartino picks one "foreboding statistic" that 7 of the last 8 declines in home volume preceded recessions... and that's exactly what we're getting now. But is this an iron law or economic noise? We're from the school that says you can't just backtest to make predictions. We'll see.
Something's gotta give (CNN Money)
Yet another article on rampant inflation that just has to sink the stock market eventually. It's everywhere: Gold, silver, oil, steel, labor, the long bond, etc. And yet it's nowhere. There's a real danger in confusing natural inflation (the stuff that comes from growth and hitting the limits to capacity) and monetary inflation, the stuff that comes when government runs the printers. Maybe the government is running the printers, but other countries are running the printers even faster, per their currency-depressing monetary controls. But, hey, you don't need us to spin things optimistically, that's what we've got Larry Kudlow for.
As summer nears, gas gets pricier (Asbury Park Press)
Uh-oh, Summer AKA the Summer driving season SKA rising gas price season is back upon us. It would have been so nice if oil were back near $50, gas below $2/gallon, and we could see the end of these article, but no such luck this year. Do photographers ever get bored taking pictures of gas pumps and gas price signs? Or do they just re-use the same ones from last year? Inquiring minds want to know.
Music the Example for Free ABC Shows (AP)
Disney claims their move to offer free online content was inspired by the troubles that the music industry has seen in online distribution and file trading. If that's true, what caused them to move in slow-motion over the last 5 years, only to come up with a plan that sounds simple enough to develop in a weekend? Andy why are they just releasing a few shows? The same can be said about most media companies, which now, in 2006, are trying to figure out an internet strategy. Still, they deserve some credit -- it's better late than never.
Should we just build a big fence? (Marginal Revolution)
Economist Tyler Cowen on why, even if you want to stem immigration, the fence solution isn't a good one: Mexicans illegals enter the U.S. through two major channels. They run (or swim) across the border, or they buy illegal papers. Usually the papers cost more than the hiring the crossing guide. The papers make for an easier and safer journey, for obvious reasons. Mexican women, I might add, are more likely to use false papers, given their (their father's?) greater aversion to the physical strain of four days in the desert. If you shut off the desert walks (assume the fence is impregnable, ha!), more Mexicans will use illegal papers. Did I add I would expect the cost of the papers to fall, not rise? Many Mexicans don't trust the purchase of papers, as opposed to the desert walk. If the walk were impossible, networks for manufacture and sale of the papers would become much better developed. The illegal papers would become much cheaper and much more widely used. In other words, more young women will come. Many of the Mexican men will have wives here, not back home. Many more young Mexicans will be born on U.S. soil.
Plans for Steel Futures Are Advanced (WSJ)
Exciting news for any steel buffs out there; the London Metals Exchange (have they gone public yet?) plans to start testing a steel futures contract by the end of 2006. The steelmakers are generally against the idea, arguing that steel isn't a commodity like oil, but a more varied product that can't be captured in a single futures contract. Already, some private companies have created their own financial instrument, which through a series of stocks, bonds and other commodities try to roughly track the price of steel -- offering their clients hedging opportunities. Now when will I be able to buy steel in ETF form?