Skip to main content

Opening Bell: 6.14.06

White House Weighs Move To Rein In Fannie and Freddie (WSJ)
Why does this remind us of that scene in coming to America when James Earl Jones 'punishes' his son's servant Simi (played brilliantly by Arsenio Hall), by banishing him to the Waldorf Astoria whereupon he'll be bathed by three beautiful servants. If there's anything that Fannie and Freddie want it's the impression that the government is actively managing them -- all lingering questions about their financial health, their failure to file reports etc. disappear if the government is involved and presumably won't let them go bankrupt. Ooh yeah, bring on the punishment.
American Media to Sell Five of Its Magazine Titles (WSJ)
Earlier this week, if you'll recall, there was speculation that American Media, publisher of glossy celebrity gossip, might do an IPO at some point. Were that to happen, it be an important marker for the celebrity bubble, though we'd hesitate to call that a top (at least we hope not). Now comes word that the company is looking to dump some of its lines in order to find a more perfect blend of titles. And here's a hint, it's not the celeb stuff they're looking to dump, it's stuff like Muscle & Fitness, which has pictures of grotesquely built men on the cover as opposed to pictures of Lindsay Lohan. What's funny is that they just bought some of the titles they're looking to sell only three years ago in a bid to diversify away from gossip. Now, clearly, they want to double down on gossip. It's like when Corning got rid of their old-line glass assets to focus just on fiber optics. We can only hope that the company's title shuffling is a sign of things to come.
Goldman group agrees to buy AB Ports for $4.6 bln (Reuters)
As the saying goes, if you can't snag an airport, buy a regular port. So a Goldman-led consortium of buyers is plunking down $4.6 bln for Associated British Ports, the largest port operator in the UK. Luckily for Goldman, UK politicians don't seem to have a knee-jerk reaction when a foreign concern wants to invest in domestic ports. More significantly, it's a continuation of an investment theme we've been seeing over the last few years (executed well by Australia's Macquarie) among investment banks to buy natural monopolies, like ports, airports, bridges, toll roads, etc. In this case, it's possible that Goldman won't be the last bidder and that they'll have to raise their bid to hang on.
With A Landing So Soft, Why So Worried? (Matrix)
This particular post is referring to the housing market, but it seems that the "soft landing" line is being uttered with increasing frequency these days. Does this terrify anyone else? It seems the harder the market falls, the more likely people are to call it a soft landing. It must be more psychological than anything else. As for the housing market it seems many of the chief real estate pundits and researchers are all coming to the soft landing conclusion, which would really be something spectacular. Could it be that after a decade in which every idiot next door got rich by leveraging for a new place, nobody gets hurt? Talk about the greatest form of legal wealth creation. Of course, when everyone agrees and gives the "all clear" sign...

Airbus Faces a New Delay in Delivery of Its Biggest Jet (NYT)
That's yet another slip for Airbus in its bid to get back on pace with Boeing. The company's new A380, which is supposed to go mano a mano with the Dreamliner, will be produced in limited quantities due to manufacturing problems. The company had expected to sell 25 of the big birds in the next year, but has reduced its forecast to 9, in large part because the company is still making significant design changes. At this point, the A380 is Airbus' Windows Vista which might have already been released were it not for regular, unsurprising delays.
The Roulette Wheel: An Aid to Decision Making (Alpha & Omega)
This story is about medicine but could have financial implications if you let it. Researchers have developed a roulette wheel that helps patients understand probability and risk. For example, while a doctor may be able to tell a patient that he has a 7% chance of prostate cancer, this number is likely to mean little to him. For one thing, we don't tend to think about our life as one version of many possibilities, or iterative in any way. We don't think "if I live 100 times, 7 of those times I'll get prostate cancer at the age of 56" since we only live once. So instead of being presented with numbers, the patient will get a roulette wheel, spin it a few times, and experience the sensation of landing on said result, in an attempt to get them to internalize the number. The researchers believe the process will allow them to make better decisions. Quants do something similar with their Monte Carlos producing millions of virtual spins, but perhaps investors should literally spin a wheel around a few times to get a feel for possible outcomes.
'Skype Me': EBay to Add Button to Listings (AP)
One of the main ideas, or at least it seemed at the time, behind eBay's purchase of Skype, was to better facilitate communication between buyers and sellers in its main auction business. Well, it took awhile, but eBay finally got around to adding a 'Skype Me' button to its auction listings so that this intent can actually be realized. Now you can call up the seller or test them instantly when you see an interesting item for which you want more information. And as if this cross-brand promotion weren't enough, Skype is also adding a PayPal button, so that you can send money to the person you're talking to over the phone, which sounds perfect for college students and their parents. Wait, do we hear the s-word? Yes, we think so. Did someone say 'Synergy'?
Grassley: Deal with backdating (Marketwatch)
Perhaps this is supposed to be a real scandal, but it's turning into a major snoozefest. Backdating isn't nearly as sexy as scandals in the past that involved $100,000 shower curtains or Bermuda-based shell companies that had the same name as Star Wars characters. This one feels like wonky accounting, and there's that nagging suspicion that the furor around backdating will cause a lot more harm than the backdating itself. And there's that even more nagging sense that even if backdating is quashed, executives will just move onto the next thing for purposes of boosting compensation. Still, that hasn't stopped the local gossip-rags from calling it the Perfect Payday and hyping the story as much as possible. SarbOx on steroids, here we come.
VeraSun IPO tops expectations (Reuters)
Get ready for a hot ethanol IPO. VeraSun comes public today amid ongoing hype about the corn-based fuel source. Given that ethanol has been heavily subsidized and still hasn't really caught on, we'll lean against the hype, though there's an interesting debate about the efficiency of ethanol, which you can learn more about here.