Opening Bell: 7.3.06

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Meet Hollywood's Latest Genius (LA Times)
People like Gretchen Morgenson and the rest of her cadre would be well advised to become familiarized with some of the economics of Art De Vany, and a growing number of people who appreciate the role of randomness in business. In an article with rare insight, the LA Times explores luck and randomness in the film industry, with most serious analysts concluding that it accounts for quite a bit. All of the media visionaries and the great studio heads should give more respect to dumb luck for their success. And it's not just Hollywood. Fund managers and VCs should too. So a great year, or a great 10 years doesn't really say much about a person's skills. If there's a case against massive bonuses and salaries, this is it (though it's not airtight, as there are other reasons besides rewarding specific skills) for big paydays.
Federal officials investigating kosher slaughterhouses (Newsday)
Newsday teases by reporting that AgriProcessors Inc., a large kosher slaughterhouse, may be under an anti-trust investigation. But apparently they don't know any details, because that's all we get. Still, it could make for a great story. What possible complaint could be leveled against a kosher slaughterhouse. Of course, the barriers to entry are somewhat higher than a typical slaughterhouse. If AgriProcessors were to corner the market on Rabbis, to bless the meat, then there would be little for competitors to do to break in. Or maybe AgriProcessors has a monopoly on information and reputation. The company or its allies set the standard of what's Kosher, making it so that only the company can meet the threshold. Seriously, if anyone knows more on the situation, please let us know.
Behind Big Wall Street Failure: An Unregulated Bermuda Unit (WSJ)
The Journal has a nice piece about the Refco implosion, and the company's use of an unregulated Bermuda-based subsidiary, that treated client money and company money as the same thing, as they slung both about wildly. To use the term Enronesque doesn't seem inappropriate at all, as Refco was once a conservative commodities broker mainly serving farmers. The rapid collapse really is quite a story and would probably make for a good TV movie (it involves angry clients barging into an executive's office demanding their money). One notable thing about Refco, of course, is that they declared bankruptcy just a couple of months after going public. As Tom Kirkendall points out, the question that's never answered, is what on earth the company was thinking going public, given how shaky things were internally.
Airbus's Parent Turns to New Leadership to Restore Credibility (Bloomberg)
Well, it wasn't hard to see this coming. Airbus pushed its co-CEO, ahem, embattled co-CEO Noel Forgeard out of his position, after several operational issues and his own questionable sale of stock. Replacing Forgeard is EADS board member Louis Gallois, whose resume looks classically French. Through his career he's jumped back and forth between various businesses, and quasi-government operations, such as the French Rail. No doubt, his experience playing both sides of the game will come in handy at Airbus.


Bubble's Over, Sellers in Denial (Volokh)
So what did happen to the housing bubble? Remember when we heard about it everyday; it was even on the cover of Time magazine (or maybe Newsweek). We expected a calamitous collapse, as everyone's personal ATM would top spitting out cash. All those obnoxious 24-year old, hipster "I'm a real estate speculator; I just bought my first loft off the Jackson stop on the L. I'm closing on two more later this month"-jerks were supposed to lose their shirt. So what happened? It appears the story is unfolding, just a lot slower and spottier than anyone guessed. One classic sign of post-bubble mentality is that sellers won't sell for less than the highest price the house was appraised at. They're upset with their broker for not getting them "full value", i.e. what it would have been at the top of the bubble. But as people who held CMGI to 0 can attest, it sometimes pays to sell after the peak.
A Search Engine That's Becoming an Inventor (NYT)
Yes, we know; you don't need another Google story. Too bad. At least this one isn't about how the company compromised in China or wants to index all of the world's information or "doesn't do evil". This one is actually about the company's growing hardware expertise. According to some, the company has become the fourth-largest computer maker in the world after Dell, IBM, and HP. They've set up custom-designed boxes, made with AMD chips, strung together to form enormous super-computers. Meanwhile, its competitors lamely buy their hardware pre-made from companies like Sun. Weak. And just to stick to also rans like Yahoo and Microsoft, one company executive claims that Google has considered getting into the chip-design business -- probably just some skills they picked up along the way.
Farm Program Pays $1.3 Billion to People Who Don't Farm (Washington Post)
There's probably no easier article to write than one exposing the folly of the Farm Bill, and all the nonsense subsidies that are handed out. The Farm Bill really cuts across political ideologies, though in recent years the "What's The Matter With Kansas"-crowd (read: Liberal) have latched onto it, wondering why family farmers in Midwestern states would ever be against it. Perhaps people don't like seeing their neighbors get paid for growing food if they're not actually growing food. Turns out, people who live on land that once was used, or could be used to grow crops can collect a monthly check from the government. Considering that Archer Daniels Midland is just a large for-profit manifestation of the Farm Bill's largesse, perhaps they'd save major money by getting out of the food business altogether, and focusing completely on the theoretical, possible food business. All profit, no expense.
Piracy Zaps China's Tech Industry (Wired News)
For a long time, US software companies, and other brand-owners have been imploring China to crack down on piracy. One of the arguments has been that eventually, as domestic companies started to innovate and produce novel software, that they would suffer. This may be starting to happen, as more Chinese tech companies are growing frustrated at their wares pirates. And of course it's not just software, as items such as booze and cigarettes are copied as well. In all likelihood, the effect on local companies will be the impetus for the country to attempt to curb the practice.

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