Opening Bell: 5.4.06

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Icahn's Assault on Time Warner Fails to Improve Share Price (Bloomberg)
This might not seem like new news, but it's never to late to take stock of an important lesson. You can't make lemonade out of lemonheads, no matter how hard you squeeze. The Icahns of this world think that you can just mangle a few divisions, spin something off, announce a buyback, and voila, make a few billion dollars, but the stock market is usually savvy enough to see right through this. For Time Warner, the stock is down 6.9% since Icahn started his campaign last August. That's unfortunate for Time Warner shareholder, but think about how much of a loss this is for Icahn himself, who has to calculate not just the paper loss, but also the waste of time and money he's spent. That's always the kicker too. The amateur investor thinks they're hot stuff by reading every line of every SEC filing their companies file; imagine if they expensed those hours, how much worse they do.
Experts: Enron financial reporting correct (AP)
Just because you don't understand mark-to-market accounting, or the special entities set up by Andy Fastow doesn't mean that Enron broke the law. Both of those things have justification and fall within the realm of accounting exotica. So it's not surprise that a character witness would say that Enron's financial reporting was correct, or at least it shouldn't be a surprise. So far, this trial seems reared towards convincing the jury that because they don't get how Enron operated, surely it must have been a house of cards.
No Credit, No Raise for CEO (Washington Post)
Of all things, this society seems to have very little tolerance for the plagiarist. A few lines borrowed from another work is sometimes all it takes to shatter someone's career. So it's a good thing for the CEO of Raytheon, whose folksy business wisdom turned out not to be his own, isn't only going to lose his annual pay raise this year. He should feel lucky, it could have been much worse. Who says there's no sense of ethics in business?


Investing: Big Risk on Campus (BusinessWeek)
In case you hadn't noticed, college endowment managers are the new rockstars of finance. Everybody wants to read their annual letters, as if they were Buffetts, and they've been producing returns at a phenomenal rate in recent years. So it makes sense that smaller colleges, envious of the returns enjoyed by Harvard and Yale, are looking to the hedge fund game. The problem is that a college endowment really should be a wealth preservation tool, as opposed to wealth accumulation. Furthermore, a university can ill afford the types of major losses, that one should expect with a high-risk investment. Although there's a million reasons to call a top in various bubbles, with none seem to be panning out, you might want to put this on your list of indicators. Back in 2000 colleges bet heavily on .coms, only to lose a lot of money. Having some decidedly division II fund manager up your risk level does not seem like a wise idea.
UAW Calls for Strike Vote at Delphi (WSJ)
This might be one of those big font headlines throughout the day, but don't freak out before reading the article. Delphi workers are not going on strike. The union merely authorized a strike as a matter of housekeeping; apparently they always want to keep that option open. But, yes, the move was fully expected and there's no company shutdown. Of course, leave it to the union to take any opportunity to be antagonistic.
One on One Interview With Jack Treynor (Financial Engineering News)
Here's one for the finance nerds out there -- a rare interview with a giant in theoretical finance, Jack Treynor. Treynor, a Nobel Prize winner, helped develop the Capital Asset Pricing Model (CAPM), which has all sorts of uses in studying options, risk, and fund performance. Definitely worth a read.
Kodak Posts $298 Million Quarterly Loss (AP)
Kodak has been on the contrarian watch list for some time, as the world keeps waiting for them to apply the tourniquet and staunch the bleeding. But they're in one of those restructuring cycles, where losses simply get disguised as bigger losses, while the underlying business goes through wrenching dry heaves. The big news is that they may sell their vaunted medical imaging business, a major cash cow. Once again, expect a series of articles (Barron's, we're looking at you) to discuss the prospects for Kodak, and how the transition to digital is further along than anyone is giving them credit for.
German public housing attracts foreign buyers (IHT)
The housing boom isn't finished, it just moved on to Germany. That's the beauty of booms in a globalized world, nothing pops anymore -- the air just slowly sinks out, getting absorbed somewhere else. American private equity firms are buying up huge swaths of German public housing, which has been well kept up, and is cheap due to a stagnant real estate market. It also helps that money is cheap in Germany, making the deals easier. Lately, the German economy has shown signs of shaking off its slumber, and should the giant roar to life, these may prove to be good bets. It's interesting that American firms continue to buy foreign assets -- we keep waiting for our foreign debt collectors to jump off the boat at Liberty Island and repossess Manhattan.
Wal-Mart's April Sales Rise 6.8%, Most in Almost Three Years (Bloomberg)
Apologies to Wal-Mart, maybe the late Easter really did hurt March sales. We hadn't realized that that selling baskets of chocolate and plastic eggs was such a big business, and thus we were skeptical of their claims that a late Easter was really hurting March sales. But now that April sales have roared ahead, maybe there's something to it. The company still hasn't proved that it can get things on a growth track again, though they're certainly trying. In their bid to lure high-end customers, they're now selling $150 bottles of champagne, among other things. They're also selling sushi, proving that the rich are always capable of being reduced to simple stereotypes.

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