Opening Bell: 6.26.06

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SWIFT breached - Big Badda Boom - will this hasten dollar shift? (Financial Cryptography)
Last week, when the Times revealed the government's monitoring of the international banking system, most pundits got all aflutter debating whether the paper was somehow unpatriotic in revealing the government's actions. More interesting are the financial implications of the news that SWIFT is now known to be a compromised system. Sure, they'll say that there are tight controls about how the databases are accessed. Does that make anyone comfortable? Will this give rise to new banking networks that aren't so based on US banks and US currency? Will this be a shot in the arm to Islamic banking, which is sprouting up in Europe? What about digital currencies or gold? This may seem far fetched, but at a time when people are worried about the health of the dollar, it's worth wondering about how much we'll pay for our lust for information. Besides, like Al Qaeda would be stupid enough to use the regular Western banks.
Warren Buffett gives away his fortune (Fortune)
It's always news when Buffett speaks, so it's particularly noteworthy when he talks about giving away $35 billion of his fortune before his death. Oh, and he's giving it to his friend Bill Gates to take care of, for the use of fighting world diseases. Buffett's philanthropic vision has long been known, though what's new is the pre-death part. Of course, when your main vices are cherry coke and peanut butter & jelly sandwiches, it must feel like a little bit of overkill to have $35 billion in the old e*trade account. Stories like this help highlight one of the advantages of having rich people in society, they're good for philanthropy. Some might say this is backwards, and that if we things were more even, such generosity wouldn't be necessary, or the philanthropic burdens could be shared among more people. For one thing, there would always be problems to be solved. Second, it's a lot harder to coordinate the giving of $35 billion among 1 million people, than it is for Warren to wire it to Bill. Larry Ribstein has more.
Lakshmi Mittal wins Arcelor bid (NDTV.com)
It wasn't a 'knowledge economy' deal, so the Mittal-Arcelor saga never got as much attention as, say, Oracle-Peoplesoft. But digital goods flow freely across the 'net, with little control from their creators, a lot of people will be wishing they sold something that scarce, like steel. All along, one had the sense that Lakshmi Mittal would not be deterred in his quest to add to his slice of the steel market. Still, the company faces some unjoyful organization and consolidation work in the months (probably years ahead).
New Yorkers lose insurance due to Katrina (Daily News)
It appears we have a classic 'market for lemons' playing out. The fact that Katrina hit and devastated the gulf last summer has given the insurers a reason to reconsider some potentially risky properties, and as such a number of New Yorkers are seeing their home insurance dropped. Well, that's one explanation. The other explanation is that the insurance executives have been spending a little too much time watching disaster shows on the Discover channel featuring hurricanes hitting Manhattan. Either way, it looks like the ripple effects of Katrina are continuing to be felt. Hmm, maybe the affected New Yorkers should move to some flood/storm prone city in Florida where insurance is subsidized by the government.


Phelps Dodge Is Expected to Buy 2 Big Nickel Miners (NYT)
Just as the Mittal-Arcelor saga reaches its final chapters, there's new news about consolidation in the metals world. Phelps Dodge, which is in the copper game, will buy out two large nickel miners, Inco and Falconbridge, in a bid to consolidate that space and put an end to some messy dealing between the two companies. The companies had merger plans of their own, but shareholder squabbling wasn't letting the deal go through. So Phelps will play the role of peacemaker as it will first buy out Inco, and then make a heightened offer for Falconbridge. Fortunately, the complicated nature of the deal shouldn't leave us at a loss for further twists and turns -- maybe even another suitor.
Chasing Upscale Customers Tarnishes Mass-Market Jeweler (WSJ)
It must have seen like a great move at the time. Just over a year ago, the popular jewelry chain, Zale, decided it would go up the food chain and target high-end customers. They were worried about Wal-mart encroaching in on the low-end diamond business, among other things. Well, that failed real bad. They lost a lot of regular customers, and (surprise surprise) the rich didn't seem interested in buying their diamonds at Zale (yes, we though it was Zale's too). Just after Christmas, when it became clear that the move had failed, the CEO was forced out. The story might present a lesson on the sushification of Wal-Mart. Just because they're targeting the rich doesn't mean they'll actually get them in the doors. And if they add too many luxury items, they may turn off their bread and butter customers. Surely, this will be a b-school lesson for years to come.
Microsoft Wants Your Office Telephone (WSJ)
Ignore the headline; Microsoft wants a lot of things. They want you to make all your purchases using a digital wallet that they'll host. They want your web browser, search and mobile phone OS. There's nothing wrong with this, but the days in which Microsoft's entrance into an area necessarily made the incumbents quake are over. They've been trying to do to the mobile phone space what they did to the desktop for years, with only marginal success. Now they just want the regular phone, where they'll battle a range of incumbents who build infrastructure for office IP telephony. We'll certainly wish them good luck, but we've heard these stories so many times before, it's hard to get excited.
Dealer says GM to offer 0 percent financing (Reuters)
A dealer has leaked the news that GM was set to offer 0 percent financing on '06 models and 2.9% financing on the '07s. That's pretty rough that while interest rates are up across the board, GM has to keep lending money with no returns in order to sell cars. This news came one day after Chrysler announced it would bring back the "employee pricing" fun, from last summer. As we've pointed out, that worked so well in moving stock, it didn't make sense for the companies to discontinue it. Since then they haven't exactly quit it with the whole incentives game.
East India's Iffy IPO (BusinessWeek)
Here's an amusing story from the backwaters of the "Blank Check" IPO market. The company East India Company Acquisition is doing an IPO, whereupon it will scour India for investments and acquisitions. Ok, some investors might see this as an interesting venture capital/private equity-type vehicle to play on that booming Indian market we've heard so much about lately. But despite the company's impressive name "East India...", there may be some reason to take pause. The company's founders say they will only devote 10 hours per week to the venture (good work if you can get it), and some of the proceeds will go to finance the rent owed by another one of the founder's companies. That's also a pretty sweet racket. This is very similar to the terms from Steve Wozniak's recent blank check IPO, Acquicor. All of the founders had their side gigs, and none promised to be involved full time with the deal. Still, to investors, it sounds like a fun deal. But really, who wants to be writing someone else's blank check.

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