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Opening Bell: 6.28.06

Treasury chief-elect sports a youthful indiscretion (Times UK)
Oh boy is that headline misleading. We've become trained to know what the phrase 'youthful indiscretion' usually means, and the idea of Hank Paulson having one is some pretty good stuff. But his "I did something young and irresponsible back when I was young and irresponsible" moment wasn't anything like going to Mexico for coke and hookers. Instead, Paulson broke into a public pool after hours to practice swimming. He was arrested, booked, and fingerprinted only to see the charges dropped, as he admitted to see the Senate Committee. Still, it's good stuff in its way, and if we were to scribe the portrait of a Christian Scientist Treasury Secretary as a young man, we might even call it formative, if only for some literary flair. At the hearings, Paulson also stated that economic growth and spending cuts could help reduce the deficit; sounds like he's up for the job!
The unit bias (Marginal Revolution)
If there's one kind of column that is worthy of derision above all others, it's the "cheap stocks for under $10 (or $5)" piece (Natural habitat: There's certainly a special hell for those promoting the idea that stocks with nominally low prices somehow classify as cheap. But these columns are likely to persist as long the individual retail investor is a) a sucker and b) subject to the unit bias. Basically, people are likely to see their consumption change based on the size of the units involved. For example, a bowl of free M&Ms with a teaspoon for serving will prompt less per/person eating than when a tablespoon is placed in the bowl. Generally, the larger the implied minimum quantity, the more people will eat. Now in stocks it's the other way around. Eating more is good; paying more for stocks is bad. So when people get the chance to buy a cheap stock, time to fire up the Powertrader account.
Hedge Funds Sharpen Their Political Game (WSJ)
After years of taking a beating in the press for existing in a "shadowy, unregulated world", the hedge fund industry is smartly going down to DC in a fight to preserve their status. So far the activity is still small -- the top hedge fund employees made a total of $1.2 million in contributions to Republican and Democratic candidates, though that's 50% above last year's amount. The fact that they feel the need to lobby in DC is really a testament to the success of this great American industry; they've clearly arrived. Also, Naked Shorts has a good overview of what the SEC may do next, now that its first attempts at regulating hedge funds have been shot down.
Rambus Stock-Options Errors May Require Restatements (WSJ)
The stock options backdating scandal, which certainly has spiraled into the millions of dollars by now, continues to ensnare more companies. Rambus is the latest to identify problems in the way the options were granted, though it has yet to find evidence of any material results or any potential tax hits. This isn't surprising -- we're talking about the bottom-line effect of a CEO bonus that was probably offered right before the bubble burst. If there's a scandal to emerge here, it's the perverse incentives for a company to review its own books. Why announce a voluntary internal review -- be a good corporate citizen -- if it only prompts further scrutiny of the books?

The Death of Intel (Mobhappy)
The big tech news yesterday was that Intel was officially dumping its underperforming mobile chips business to concentrate on its core box chips business. Considering that the unit had yet to gain much traction or record a profit, it wasn't much of a surprise that the company wanted to jettison it. But, some would argue that the mobile technology business is still in its nascent stages, that the era of wireless web hasn't even started yet. So why did they choose to sell the business instead of trying to make it better and grabbing a stake in this potentially enormous space. As it's put here: "What would you think about a company in 1960 that decided to withdraw from the colour television market and focus on black & white TVs? Or a software company in 1997 that decided that this internet thing really wasn’t worth pursuing?... This is like betting that George W Bush won’t win the 2004 election - in 2006."
Daimler Hopes Americans Are Finally Ready for the Minicar (NYT)
Short answer: probably not. Please click on the above link for a picture of the minicar, which will remind you instantly why we're not ready for one. Americans generally aren't too fond of riding golf cars on the highway, not when there are H3s rumbling down the road. Furthermore, it would be nice if there were any evidence that saving gas was such a high priority for people. Sure, there's scattered evidence that people are looking to cut back, and already-popular efficient vehicles have become more, but it's really nothing drastic. Though some charts show gasoline sitting at all-time highs, when the price is matched up against earnings things don't look so bad -- at least not so bad that Americans are going to start driving this car.
Time Warner clears CFO (Reuters)
This probably won't Wayne Pace's personal reputation, but Time Warner shareholders should rejoice; the company has determined the CFO didn't use any company money to pay for a prostitute. "We conducted a review assisted by outside advisors and found no evidence of illegal conduct by Mr. Pace or any misuse of corporate assets," said the company.
Oracle's Ellison yanks $115 million Harvard pledge (San Jose Mercury News)
The secular humanists who helped show Harvard President Larry Summers are now seeing the consequences of their actions. Oracle chief Larry Ellison has withdrawn a $115 pledge he had made to the university. The plan was to establish a center to promote world health research; specifically the center would study and rank the effectiveness of various public health initiatives. Presumably, this information could help inform future initiatives about what models worked best. But it's not just petty politics prompting Ellison's withdrawal -- Summers was apparently the brain behind the whole plan, and had developed unique economic methodology to answer the question. So now we're left wondering where he'll donate his money now. Right off the bat, we can be pretty certain it won't be the Bill & Melinda Gates foundation. Not only are he and Bill not bridge friends, but he'll never accept his $115 million pledge be written next to Buffett's billions. In fact, skeptics might even argue that Ellison didn't want his donation to be overshadowed by bad timing, so he's waiting for a time when the media isn't already awash in philanthropic love.
GM Counts on Generic Drug to Help Cut $200 Mln Cholesterol Bill (Bloomberg)
First of all, when did get a sleek new redesign? That out of the way, stories about how much GM pays for various drugs are pretty fascinating and give a nice glimpse of the health issues facing middle America. The company claims that if all of its employees purchased the newly-available generic version of Merck's cholesterol-fighting Zocor, instead of the pricy Lipitor from Pfizer the company would save an enormous $200 mln. This follows reports from a few months ago about how much GM was paying for Viagra (which wasn't nearly as much, but people love Viagra stories). So why isn't GM out in front of the battle for universal health insurance? It could be a great stealth subsidy for a company that's drowning in its health bills. Hmm, positioning it this way might be a good way to dissuade people from their support of such a plan.