Opening Bell: 5.31.06

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Can Paulson Be More Than a Salesman in Treasury Role? (Dealbook)
Dealbook asks what we can actually expect out of a Secretary Paulson. If Paulson is to be more than a salesman, it'd be quite impressive, since as far as we can tell, that's about the only job description. Unlike, say, the Fed chief, which actually has control over something, the Secretary only has the 3 j's at his disposal: jib-jabbing, jawboning, and jabbering. Really, what else is this position actually responsible for, other than being a whipping boy, and denying that the country is in recession when it gets to that point? One other interesting note about Paulson comes from Marginal Revolution, which notes that he's an advocate of the dividend tax cut. Perhaps that was chiefly a function of his private sector job, but so-called income investors might find this stance interesting.
M3 or not M3? (Econbrowser)
America has a proud tradition of government cover-ups: Area 51, the Kennedy assassination, the Communist plot to fluoridate the water, the moon landing hoax and more recently the decision to stop reporting M3. M3 had been seen as the broadest measure of the money supply, and conspiracy theorists have reacted strongly since its reporting was discontinued. Their central claim is that it's proof that the government is covering up rapid inflation. But few people, when pressed, can actually tell you what it is (at least that's what happened to us when we found ourselves in such a person's company, honest). So if you're curious, economist James Hamilton has a nice explanation of what M3 really is, and why it barely has any use to economists. Might come in handy the next time you're in a bar and the conversation comes up after 3 shots of whiskey.
Clarke's task: Boosting GM market share (Detroit Free Press)
This year's top-performing Dow stock, GM, continues to make moves that investors seem to like. The latest is that CEO Rick Wagoner will cede control of the company's North American operations to GM veteran Troy Clarke. While we must admit to being impressed at GM's mini-turnaround, it must be noted that it's been completely devoid of substance heretofore. There have been several interesting moves and announcements, and one profitable quarter, which was based entirely on accounting tricks. But it's hard to call anything a comeback until, you know, sales actually do come back.
Research Firm Sees Microsoft Entering Handheld Game Business (Barron's Tech Trader Daily)
Working at a third-party research firm seems like a fun racket. Basically, your job is to come up with various possible scenarios (Apple to produce their own phone, Nokia to produce standalone music player, etc.), write up a report about it, and then flog it to your clients... oh wait. The latest is buzz is that Microsoft may enter the handheld gaming market, though it's not clear how they plan to do it. Will they manufacture their own handhelds, or will they license out the Xbox operating system to a company like Samsung, for them to produce their own handheld? If you want to know, you probably have to pay $20,000 to The Diffusion Group, which did the report. Obviously, they have a pretty good track record when it comes to licensing out operating systems, though of late they've wanted to be more associated with the specific device. Either way, it probably makes sense to extend and modify the Xbox platform in some way.


AMD Takes a Cue from Intel (Red Herring)
The AMD juggernaut isn't a new story, by any means, but it seems like everyday the company makes another interesting move in the chess game. The latest plan is come up with a noticeable "AMD Live!" sticker to put on PCs housing the company's chips. Why is this a big deal? Remember in 1995 how important it was to have that "Intel Inside!" sticker. It was a rare moment of brilliant branding by a component maker. What's interesting is that in recent years, Intel has really squandered their strong branding. In fact, they've basically given up on Pentium in favor of several unpronounceable names like Viiv, which nobody knows the meaning of. Here's a nice chart to have handy, in case you get confused when buying your next computer.
Docs Who Do House Calls Funded (Alarm Clock)
Now every firm can be like Google. Among other amenities, the company has an on-plex doctor who employees can see if something ails them. It's a perk, but also a nice way of minimizing the amount of time an employee will be a way from the office. Why go all the way back to San Francisco just to get some antibiotics for an earache or a urinary tract infection? Furthermore, it probably saves on insurance costs due to more prevention. While some bemoan the unfortunate death of the family doctor that makes house calls (though there's that one who writes for the WSJ, right?), a new startup is hiring a fleet of doctors to make house calls to businesses. So every business can have an on-site doctor (hence the company is called OnSiteDocs), just like Google -- at least one day a week. It's a simple idea, but one that could take off in large firms with regular, recurring health expenses. This kind of stuff, in addition to new startups like MinuteClinic (mall based quick-care clinics staffed by nurses) could be useful ways of reducing healthcare costs for the US.
Tribune Buyback Expected To Be Accretive (Forbes)
So the Tribune Company is going $2 bln deeper into debt in order to buy back 25% of their outstanding shares, which enthused the market because earnings are expected to increase marginally due to the lowered share count. But then you're looking at a company with $2 bln more in debt on the balance sheets, which won't be at great interest rates, right? Granted, all stock buyouts are just shuffling money around from one area to another, so in a perfectly efficient market they should be totally neutral; but if a company thinks their stock is a good buy, and they have lots of underperforming cash on their balance sheets, then it may be a better time than others. It's not absurd that Tribune itself thinks its stock is a good buy -- one hopes the board is optimistic -- but why does Wall St. seem to agree? Clearly the performance of the stock, in recent years, is an indication that Wall St. doesn't think it's a good bet; so again, why the enthusiasm over a leveraged buyback? Any insights from the readership?
All's well at the other Enron (Fortune)
About 6 months ago, we saw this ridiculous "most-respected companies" poll. Naturally, that included big blue chips like Apple and Google, though strangely it also included Sony, which had recently been embroiled in a major scandal involving exposing users' computers to viruses. And predictably, the least respected company was Halliburton. Also, to make the whole thing a little more absurd, Enron was found on the least-respected list, which was odd since there was no Enron by that point. Ah, but there is another Enron, EOG resources, an honest-to-goodness oil & gas company that was formed out of the old Enron's real-world energy resources. They're so old-fashioned, they don't even have a broadband division, hell they probably don't even have an alternative energy business. And while the last of the old Enron get ready to enter the big house, EOG (Enron Oil & Gas) is thriving on the street, as they recently hit a mother lode of cheap Texas gas. Wonder if they'll ever get into energy trading.
U.S. Stock Decline Won't Turn Into a Bear Market (Bloomberg)
Investor and Bloomberg columnist John Dorfman lays out the case why this particular correction won't turn into a bear market, defined as a 20% drop from the peak. First, he lays out the standard arguments, that the economy is strong. Corporate earnings are high and interest rates aren't high by historical standards. This ignores some of the more esoteric macro arguments about trade deficits, risk, housing, etc., which is okay. But essentially, Dorfman lays out the odds. Basically, bear markets are rare. The majority of corrections this size don't turn into formal bear markets. You can't really predict the future based on past events, but it seems reasonable to try and form a probabilistic picture based on the likelihood of various scenarios. Certainly worth a read if you're trying to decide what to do in this market.

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