Opening Bell: 7.27.06

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Growth Slowing Across the Country, Fed Regional Reports Say (NYT)
Well, is it here? This quarter we saw the first steady stream of disappointing earnings, at least from the major tech companies, and now the results of some regional Fed surveys are in, suggesting that growth is slowing in various parts of the country. So maybe we're on the verge of a recession soft landing. Car and home sales appear to be slowing in many parts of the country, while tourism in New York is less robust than in recent times. Meanwhile, retailers in Philadelphia and the Midwest also were indicating softness. So remember when everyone was talking about stagflation a few weeks ago, well here may be the stag part.
Pay Rules Adopted by S.E.C. (NYT)
For those who adhere to the Louis Brandeis maxim, that the sunlight is the best disinfectant, this new regulation for you. The SEC voted unanimously to require greater transparency when executives are given perks, options, lump-sum pay, etc. All told, it will likely apply to about 3,500 employees at public companies, though there's still uncertainty over whether the law will apply to highly-paid, non-executive employees, such as Kate Couric. Recently, the SEC had signalled no, but at this point the commission has decided to review the issue at a later point.
Council defies Daley, OKs 'living wage' (Chicago Sun-Times)
The so-called big-box retailers won a major victory in court last week, when a judge threw out a Maryland law requiring Wal-Mart to devote a certain amount of its labor expenses to healthcare. But, it appears they've suffered a major defeat again, as the Chicago City Council passed a requirement compelling big-box retailers to pay a 'living wage' by the year 2010. Specifically, stores like Target and Wal-Mart must pay at least $10/hour in salary and another $3/hour in benefits. The resolution passed with a veto-proof majority, over the objections of Mayor Daley. Should be interesting to see whether the stores pull out of the Chicago market. Of course, this is the same city that wants to ban not just smoking, but any unhealthy food.
How farms stymied Doha (Christian Science Monitor)
All week there's been talk about what can be done to move the WTO process further. At the moment, the developed world just doesn't have the political will to get rid of the agriculture subsidies that keep third-world farmers poor and understandably bitter about so-called free trade. After the talks collapsed, India announced it would pursue a series of bilateral accords, but these will only go so far. The fact remains that the agricultural lobby in the US and the EU remains incredibly strong. It helps that many who don't work in the agriculture industry have this idyllic notion of dwindling but proud family farms, as opposed to the reality, which is ADM. Still, if we could only let a few thousand more farms die -- or however many disappear every minute according to the commercials -- maybe they'll be weakened to the point that we can do something on trade.


Hedge Funds' Sidecars (Forbes)
When asked to defend the positive societal benefit of the unregulated hedge-fund industry, one generally is forced to say something like "they provide liquidity" or "they allow for hedging against risk" or something vague and unconvincing to the everyday observer. Really, it's not that these aren't true. They are, they just don't get you very far. Well now you can add to that, "housing people". There's been a well-covered shortage in re-insurance of late, as investors are skeptical of putting their money in hurricane-prone markets. Well it's hedge funds to the rescue. These dare-devils of high risk have been plowing money into this area, which ultimately keeps insurance companies in the game, and thus people in their homes. So keep this in mind next time someone starts talking smack about hedge funds.
Consolidation fever in the mining industry (Oligopoly Watch)
You wouldn't know it from the press, which doesn't report on these things much, but the mining industry is in full consolidation mode. Phelps Dodge and Xstrata are in a bidding war for Falconbridge, which is now up to $20 billion. Several smaller deals are going on in Australia, New Zealand and Canada. And while the price of commodities remains strong, and business quite brisk, there's a unifying theme to these deals. Like the oil space, companies are paying money for proven reserves as opposed to investing in exploration. The standard reading is that they don't think there's much left out there, and so the price will go up, though that seems a touch simplistic. Take from it what you will.
The rise of private equity and the decline of the publicly held firm (Ideoblog)
Today's SEC announcement that it would increase disclosure requirements for highly-paid executives adds to the perfect storm of factors which continues to fuel the rise of private equity. Many cite the continued low-interest rate environment, but that's just part of it. There's Sarbanes-Oxley, and proxy battles dealing with obnoxious activist mutual funds, and the options backdating scandal, and a host of other things that make being public no fun. So unless some of these things change, which seems highly unlikely, there's a good chance more firms will elect to pursue the private route.
Mercedes Unit Boosts DaimlerChrysler's Net (WSJ)
After yesterday's operating profit at GM, which we are still skeptical about, it was Daimler's turn to come out with better-than-expected news. The company reported that its second quarter operating profit rose 11%, fueled by higher sales at its Mercedes division. The financial services and truck divisions also contributed to the better-than-expected operating profit, though the Chrysler was down slightly year-over-year.
Boeing Does the "Right Thing" (BusinessWeek)
What could it possibly mean when a company does the "Right Thing" in quotation marks? It probably means that the companies actions are some version of the "Right Thing" that would be familiar to a school teacher, New York Times Sunday Magazine ethicist or anyone else who's in the business of telling you what's right and wrong. In this case, Boeing decided not to pursue a tax break based on a major fine it had paid the government over ethics issues. Though they could have saved shareholders a lot of money, but the company chose to do the "Right Thing". Of course, they may have saved the shareholders money by avoiding the controversy. There are Senate hearings coming up on the company's actions, and we're sure that many irate Senators would have had a field day if Boeing had been able to write off their ethics fine. So maybe they just dig the right thing (no quotes, no capital letters), and put the issue behind them.

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