Opening Bell: 7.17.06

Author:
Publish date:

Executive Pay: The 9/11 Factor (WSJ)
So this weekend, the options saga took a major turn (get out your notebooks). We're no longer discussing backdated options or spring-loaded options or anything that might be constituted as illegal. Now the issue is just options themselves. Turns out that in the wake of 9/11, (yes, now that's become part of it) some boards took advantage of the "low stock prices" to grant executive options cheaply. In other words, as the WSJ reads it, companies and their executives were exploiting the initial weakness after the attacks to enrich the chief. But, and this The Journal doesn't clarify, how does anyone know when markets are low or high? In fact, if the boards were really granting these options (which weren't illegal) to take advantage of market of conditions, they really mis-timed things. The markets continued to sag for another couple of years. Was anyone who bought shares when the market re-opened trying to profit from 9/11, as the implication goes? As Larry Ribstein puts it: One reason our markets were so resilient is because we had managers who were focused on money. Should they have been thinking only about how to fill the shareholders' wallets with the nasty stuff? So what we really want from our corporate executives is people who are greedy enough to be thinking about money after 9/11, but altruistic enough only to be thinking about how to make it for the shareholders? Aren't we getting a little picky?

Toyota may look to block Nissan/GM deal: report (Reuters)

Now this story gets interesting. Rumors are coming out that Toyota, enemy #1, may look to intercede in the GM/Renault talks. The company claims to have war-gamed recovery scenarios for the troubled automaker. If you're GM, which company makes for a better partner? Obviously, Toyota is the strongest, but what use do they really have for GM other than they don't want to see it fail out of political concerns. The main concern for Toyota, of course, is that the death of GM leads to protectionism. Nissan on the other hand probably wouldn't mind seeing GM actually thrive. So if anything, perhaps the threat from Toyota pushes GM and Renault closer together at the table.
Done In The Sun (NY Post)
The mood at a luxury get together for media executives was sour, as the cruel hand of business has been dragging their stocks down of late. Normally a weekend of fun, it was a weekend discussing threats to their business -- like YouTube. They probably would've had a better time just standing around, with everyone showing their favorite clips on the service. One line stood out in particular from the report: During the week, Weinstein and BET founder Bob Johnson announced a $175 million film deal, but as of Thursday night, according to a source, Johnson was still holding discussions with hedge fund and private-equity investors to firm up financing. This makes us wonder, are hedge fund guys bored out of their minds? It's a film-school cliche that when you're looking to fund your first movie, you should drop in on all of the dentists in the area. Because they have a bunch of extra money sloshing around, and are pretty bored. So they'll pay up for the slight chance that they'll get to go to a premier or get free tickets to a film festival. So now it's regular for guys to hit up the hedge funds for cash. So are hedge fund managers the new dentists? Bored old guys who will sacrifice returns for a chance to fund a BET flick. Yes, almost certainly.
G8 may be last gasp for faltering Doha trade talks (Marketwatch)
The current summit of the G8 has a lot on its plate. There's the whole Lebanon/Israel thing, which almost certainly has them all glued to Fox News, looking for information on the latest strikes. Really, it has to be sapping up a fair amount of the time of the most important people in the world. Of course, while all this is going on, the British recording industry wants the world's leaders to focus their energies on a single Russian mp3 site that sells songs really cheaply. Seriously, they really want this to be a main topic at the discussions. And if airstrikes and cheap mp3s weren't enough, there's all this pressure on the countries to resolve some knotty trade issues, which have been holding up trade talks for years now. It's just simple stuff, like ending subsidies for farmers in the developed world. Seems like they should be able to knock that stuff out over golf. But it looks like they won't, and the latest 'Doha' round of WTO talks may be dead.


BETonSPORTS chief held in U.S. (Reuters)
Fresh off the extradition of the NatWest three, the US' war on UK business continues apace. The chief of online gambling site BETonSPORTS was unexpectedly arrested while changing planes in the US, on a flight from the UK to Costa Rica, where much of BETonSPORTS operations are located. The move comes at the same time as the Congress tried to make all online gambling. It's unlikely to pass the Senate this year, but such a measure passed The House overwhelmingly last week. Perhaps David Caruthers is being held pre-emptively, though there might be some serious legal issues with such a plan. Either way, shares of UK gaming concerns -- which has actually been rising from all the publicity of late -- plummeted on the news. Hopefully, Caruthers is being held for something totally unrelated, such as holding a small amount of pot for personal consumption.
Interactive Netscape Site Gets Some Sour Responses (NYT)
Over the coming years, we can expect many media companies to make desperate attempts to prove how with it they are. Usually, it'll be pretty awkward, sort of like when a teacher puts on a backwards baseball cap and starts rapping. The Times reports on the acrimony felt by long-time Netscape.com readers in the wake of its Web 2.0 makeunder. Instead of being a reliably boring site for top stories, it's become a user-edited site, with user-submitted stories, and voting stories up or down. Of course, at the moment, most of the top stories are about Israel and Lebanon, so at its best, the top stories basically resemble what they otherwise would.
Bob Brooks, Hooters owner, dies at 69 (The Sun News)
Bob Brooks, the owner of Hooters, and the erstwhile Hooters Air, died in his home at Myrtle Beach, SC. He was 69. Brooks wasn't the founder of the restaurant, which was beloved by so many, but took it over and revived it in the mid 90's. Still, his most ambitious project, Hooters Air couldn't stay afloat on chicken wings alone. After three years, the theme airline, which hoped to draw more people into the Myrtle economy, gave up, joining the dustheap of novelty airlines. Brooks originally made his money selling salad dressing, though eventually he came to manage or own several different operations.
Goldman Sachs's Conflicts of Interest Convulse Chicago, Indiana (Bloomberg)
Goldman like to explain its ongoing success by the company's unique and complicated business model, that sees the company advising clients on deals, and often trading alongside them as well. From time to time, the company has been accused of having a conflict of interest, but that's probably just because it's involved with so many things, that the appearance of conflict is inevitable. For example, while the company had been advising the Chicago on the sale of Midway Airport, the local government felt Goldman couldn't be impartial due to its own airport investments in Europe, particularly since it was possible a Goldman asset may be among the bidders for Midway. This is a legitimate concern, though the vastness of Goldman's business provide it solid cover Still, these conflicts are likely to increase in frequency, each one opening up the specter of media/Spitzer-driven scandal.
Oil Prices Fall in Volatile Trading (AP)
It's a little cheap to end on a story about volatile oil prices, but that's what they are -- volatile. Just the other day we were talking about 77-78, and then we got a weekend of WWIII in the Mideast, but now we're looking at 76 as Iran (remember them?) apparently gave in on some point regarding the resolution of the nuclear weapons program. What we're seeing is Bush's whack-a-mole version of foreign policy. Everything is just another issue to beat down with a big club, and hope that it stays down until the last mole is beaten. So far, so good.

Related