Opening Bell: 4.28.06

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Congress has big ideas on gas prices (Seattle Times)
Forgive us if it sounds like a broken record, but it would seem that idiocy on a daily basea needs daily debunking. Real quickly, the latest proposal, you've probably heard, is for the government to send all drivers a $100 rebate check. This isn't much different than the $300 that Bush had sent back to each taxpayer a few years ago. What's funny, is if you were to ask the average person whether it's a good idea to just print up $100 bills and send them out, they'd probably recognize that you can't just print up currency to make people wealthier. That's why counterfeit currency isn't good. Yet, if you write everyone a check, and say it's a gas rebate, people will think it's a good idea -- even though it's the exact same thing. That being said, will our status as car-less New Yorkers prevent us from getting the coin?
Exxon's $8.4 Billion Net Faces Fire on All Fronts (WSJ)
It wasn't quite the $9.9 billion they made last quarter, but it seems that $8.4 billion is enough to piss off the politicians who did their usual tango. Still it came up a little short of Wall St.'s expectation. Perhaps it was intentional, maybe some knowingly wasteful expenses, a few more massages here and there for Lee Raymond, just to keep earnings a little low. Now, here's the lesson of the day Schumer, just in case you're reading. Suppose you imposed a gas cap, and earnings dropped to $3 billion/quarter. You'd probably go around saying that the company is still plenty profitable, so it's no big deal. But the stock would drop, thus meaning major capital losses for all of its investors. In other words, it's been a major loss of money. Their profit is an illusion, as the company has actually caused a loss for its owners. Got that Chuck?
Pfizer Shareholders Back CEO's $83M Golden Parachute (Forbes)
Congratulations to Hank Mickinell for securing his $83million dollar retirement. It's not quite as much as Lee Raymond's $400 million $99 million, but it's pretty good for an executive at a company that's not exactly firing on all cylinders these days. More importantly, it's a victory for what corporate law professor Stephen Bainbridge calls rational shareholder apathy. Basically, on matters like this, it's just not worth it for the shareholders to care. In a case like this, when the pay package barely represents pennies per share, why the did people rent airplanes waving a sign that said "Give it Back, Hank!" and fly them over the shareholders meeting? For more on the kind of demagoguery over CEO pay, particularly with respect to the Pfizer case, check out some of the writing of Larry Ribstein.
Microsoft's Pig in a Poke Problem (Infectious Greed)
A lot of people, including Eric Savitz at Barron's have been trumpeting the fact that Microsoft is heading into a very strong product release cycle. There's the new Vista, Office, etc., all of which should provide a tailwind for sales. But Paul Kedrosky notices a problem, after reading last night's earnings reports. All of the company's fat profits are being plowed into losers, like their endless quest to catch up to Google in search, and their costly XBOX program which isn't paying off. They're going to plow another $2 billion into search next year, few having much confidence that it will work out. So, yeah, winners subsidizing losers, that's a tough strategy.


9 tech IPOs worth waiting for (Fortune)
What does it mean that these are IPOs worth waiting for? That everyone should go out and buy them as soon as they go public. The article doesn't really explain that, but then cryptically starts with this, "It takes consistent profits to qualify for an IPO these days. Even solid companies are waiting longer before trying, and many just sell to big corporations instead." Now a lot of people will argue that this is a good thing, especially if they're trying to argue that there isn't a bubble, or much speculative excess these days. But, is it such a bad thing for the market to bet on some risky, speculative companies sometimes? Why is profitability so important when deciding what the public should be able to invest in? The lack of unprofitable IPOs probably has more to do with excessive regulation (SarbOx) than an unwillingness of investors to invest in unproven companies.
Bernanke Bets His Reputation, Foreshadows Interest-Rate Pause (Bloomberg)
The fed has done us all a great service; they've finally shut up all of those people who natter away the mindless mantra "Don't fight the Fed". Simple rules rarely prove useful, and if you'd listened to these people three years ago, you'd have missed out on quite a stock market. Now The Fed is strongly indicating that the tightening cycle is coming to an end, so what now? Do those same business-school geniuses tell us that now is that time to buy? Or do they tell us it's different this time? Heh, either way you look at it you lose. The end of rate hikes may induce weakness in the US dollar, which does represent change... but can the dollar weaken, while stocks hang on? Time will tell.
The Economist: Goldman Sachs is the cover story (Wall St. Folly)
For those of you who subscribe to Barry Ritholtz's cover-jinx theory of finance, pay heed to the latest economist. Goldman Sachs, fresh after gracing the cover of Barron's, is now on the cover of the Economist, with the title "Goldman Sachs and the Culture of Risk". Don't they get it, Goldman isn't just one big hedge fund, rather they perform complicated "co-investments" with their clients.
China must do more to stunt growth (Globe & Mail)
A Citibank economist is imploring China to do more to stem its rapid growth, claiming that a mere rate hike isn't enough. He argues that tighter limits need to be put on lending, like higher reserve requirements. So he's not actually claiming that China needs to slow growth, so much as he thinks they need to slow credit expansion. But this doesn't square with the story we're always told about China, which is that they don't have much borrowing, and instead just lend all their money out to greedy Uncle Sam. So what are we missing, since when do the Chinese borrow money?
Lay-Skilling, Week Thirteen (Houston's Clear Thinkers)
It's Friday, so we've gotta do it; check out Tom Kirkendall's always excellent roundup of the week's going on in the corporate criminal trial of the century. This week was Lay week, and if you read our local gossip rags you probably wouldn't know much about went on -- probably just something about Lay asserting his innocence, and then losing his temper. Thanks a lot!

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