Skip to main content

Opening Bell: 7.11.06

Japan Looks to Its Savers to Consume (NYT)
When analysts in the US rejoice over high spending, or the talking heads on CNBC start jumping up and down on the table because sales of flat-panel TVs fueled a good Christmas season for retailers, it always seems a little off. Americans have never had a problem finding ways to depart with their dollars. Americans aren't known for holding back in the Christmas gift-buying department. But in Japan, concerns over low consumer spending, and the desire to see consumers spend more seem much more legitimate. Ever since the 80's, the Japanese have held back on buying homes, cars, etc. out of fear. The glut of savings then pushed interest rates to zero, making Japan an unfavorable place to invest. So it will be momentous, if this Friday, as many expect, the Bank of Japan will raise interest rates from 0% to .25%. So while this bring more money into Japan, consumers still need to get over their fears and buy things for the equation to work out.
Dow Jones Poll (Ticker Sense)
Maybe this represents is a significant moment in the stock market blogosphere; Ticker Sense has asked various finance bloggers (over 300!) to take regular sentiment surveys, much like pro economists, analysts, and newsletter writers do. Of course the project may entail some risk, since the egos of most bloggers is entirely incumbent on being better than any mainstream equivalent. And if the blogger sentiment survey doesn't do as well as more mainstream surveys, you can expect mass cancellations of blogspot accounts, as said bloggers retreat to their caves -- or decide to go outside for the first time. Anyway, the first survey is in, and it turns out that bloggers are bearish on the Dow. The most popular position is that the Dow will end the year below 10,400.
When Unions Globalize (TCS Daily)
The rise of globalization has undoubtedly been a boon for many of the world's poor. As the author of this piece points out, China's citizens have seen, on average, a six-fold increase in their wealth over the last 20 years. But, years after Adam Smith, people still aren't happy that benefit can come without benevolence. In other words, it doesn't matter that foreign investment has made China more prosperous, because said investors weren't actively trying to make China more prosperous. Get it? So, the natural reaction to this is for unions to start operating on a global scale, as they stand up for the rights (and salaries) of workers in the developing world. While we'll refrain from questioning their motivations, it does seem that as anywhere else, employees in developing countries don't have much to gain from establishing an antagonistic relationship with employers. Furthermore, there are plenty of substitutes in the developing world, as jobs remain coveted in many places. The good news is that most employees so far have rejected the overtures of American unions, rightfully understanding the economics of the whole thing. Still, it's unlikely that the unions will try to stop organizing any time soon.
Alcatel shares slide after Lucent profit warning (Marketwatch)
Lucent and Alcatel better get their merge on quick. While Alcatel's outlook is good, the American side has warned on profits, citing the usual garbage. As it's always been with Lucent, bad news is good news. For example, orders are slow because customers are holding back to spend big on next-generation products. The company also had weak growth in China, which is supposed to be impossible. The good news is that the combined company expects to lay off 9,000 employees instead of the expected 8,800 once they're merged.

Google coming to Ann Arbor (Detroit Free Press)
As the Detroit auto industry fades, Michigan's had trouble getting much else going. That's been a major problem for first-term governor Jennifer Granholm, who has tried desperately to bring high-tech or biotech jobs to the state. So it's a pretty big win for her, as she's locked in a fierce re-election battle, that Google will be opening up a center in Ann Arbor. In her words, "This is a huge, huge, huge, huge thing". Umm, no it's not. We're talking about 1000 jobs here, and it will take 5 years for the company to ramp the facility up to that level. And the starting salaries are around $47,000, which is good, but not enormous. And the state had to give Google $38 million in tax credits in order to win its presence. Just for some perspective, Google's market cap stands at $127 billion, while the combined of GM, Ford, and Daimler is $77 billion. Hello new economy.
So How Much Would It Cost to Deport All Those Illegal Immigrants Anyway? (Reason)
There's a fairly compelling economic case against deporting all of America's illegal immigrants. But most immigration defenders don't even bother talking about the headline figures, i.e. how much money in dollars it would cost to shove them all out. A new study pegs this number at around $206 billion, and it could go as high as $230 billion. Okay, okay, it doesn't sound like a typical proposal from conservatives, spending all this money and all. Fortunately, for the public, there wouldn't be a tax hike to cover it -- the government would just put it on our credit card bill, and with any luck we'll all be dead by the time it comes due.
Will Foreign Firms Land Chicago’s Midway? (Dealbook)
It's not just European airports that have caught the eye of the major banks -- Chicago's Midway airport is on the block, and we can expect some of these same banks (Macquarie, et. al.) to be bidding. But while Europe's been pretty cool with foreign companies taking over its infrastructure assets, will the US be the same? We rejected the Dubai Ports thing, though of course that was Dubai. An Australian bank would not raise the same concern. Still, foreign is foreign, and any deal will certainly arose someone's anger.
Who Owns the New Land Created When Water Levels Fall? (Environmental Economics)
If the gloom and doom global warming scenarios come to be, it may have a lot of implications for bankers. The submerging of the financial district in the event of a rise in sea levels is the most obvious issue to contend with. But while sea levels will rise, it's likely that lakes will dry up, which prompts the question: who owns this new land? Do the owners of lakefront property get to keep extending their property line further forward? Or does that new land go to auction, this raising the possibility that the owner of the lakefront property will be behind someone else's house. This is a big question, because lakefront property tends to be pretty valuable, and there should be opportunities for property investors to get in on the action.
Betting Against the Dollar (Forbes)
Retail Forex trading has been popular for some time, but it basically appeals to technical guys who don't care much about the underlying fundamentals behind the currencies they go in and out of on a minute-by-minute basis. In what may be a great contrarian indicator, Forbes has a nice piece on how the retail investor can make a long-term bet against the dollar -- and you don't even have to be a billionaire like Warren Buffett! There's nothing wrong with an investor diversifying their currencies -- it's probably a good idea even. But the bearish position is presented as basically a slam dunk: trade deficit=foreign accumulation of dollars=foreign dumping of dollars=dollar collapse. Of course there are wrinkles at each step of the equation, so it's by no means obvious. But hey, it's great that everyone can run their personal finances like Berkshire Hathaway.