Opening Bell: 8.1.06

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A prelude: Miami streets burst with spontaneous joy (Miami Herald)
At the moment, we still don't know whether we're one heartbeat closer to a new bi-lateral trading partner in the Americas. If judging by the so-called wisdom of crowds then we can break out the bagpipes now, as dancing on the streets of Miami is in belief that the big guy is gone. Or, if you believe the official word, then Fidel Castro really is in the hospital being treated for some unclear illness and he'll be back at the helm in a couple of months. And then there's the unfortunate angle that his brother, who's taking over, is seen as equally or more radical than Fidel, so even if he's kicked it, it may be awhile before change comes to the Island. Still, you gotta start somewhere.
Smith & Nephew says rep was behind cartel plot in US (Guardian)
Forget OPEC; the real global scourge may be the sinister and shadowy artificial hip cartel. Smith & Nephew announced that one of its 500 US sales reps may be at the heart of a scheme to cartelize the replacement hip market by attempting to coordinate with competitors including Zimmer, Biomet, J&J, and Stryker. Smith & Nephew believes that one of its employees attempted to kick start the scheme with an email sent to competitors that basically said (and we're barely paraphrasing here), "hey guys, let's team up and not compete so hard". All the companies who received the missive insist they rejected it immediately -- sounds like the sender was probably just bored one night and thought that a hip cartel sounded sexy. If it were so easy to just get a cartel going over an email, it would be a fun prank to do, even if you weren't in the industry and just wanted to stir up trouble.
Stop whining about SarbOx! (Fortune)
We're still nursing our hangover from the killer rager we had at the office to celebrate Sarbanes-Oxley turning four years old. But truth be told, like many in business, we probably wouldn't miss the dude too much if he were gone. Sensing a contrarian moment, Fortune's editor-at-large Andy Serwer drops the bomb today: SarbOx has been a good thing. Whoa, what? Unfortunately, anyone reading the article expecting Serwer to bust out with some killer logic will be sorely disappointed. He starts out reasonably enough by attempting to poke a few holes in the anti- SarbOx argument. He says it's unclear that it's hurt the stock market, that it doesn't matter that a few more IPOs are listing overseas, and that there may be other reasons for the increase in companies going private. Ok, not very convincing, but surely he has something up his sleeve for the pro argument. Nope. The biggest gun he can muster is a quote from none other than Paul Sarbanes who lays it down, "These people have already forgotten what happened at Enron and WorldCom, People lost all their pensions and retirement savings. The bill is really about ensuring that public companies have a legitimate system of internal financial controls. To me that is a worthwhile cost." Well, that pretty much settles it doesn't it? Paul Sarbanes still likes it. Serwer concludes with this soggy chestnut, "And by all means, it should be scrutinized. But consider the alternative. What if we had done nothing?" We don't know Andy, we were hoping that your article would have told us.
Brooks Automation Cites 'False' Options Document (WSJ)
Adding to the tally of stock options scandals, Chelmsford, Mass. based Brooke Automation has admitted that in 1999, two outside directors permitted then CEO Robet Thierenn to exercise expired options. The directors forged documents to make it appear that he had actually done so a few days before the expiry. Now this practice is pretty hard to defend -- forging documents is pretty much an admission of guilt, or at least an admission that your trying to pull the wool over someone's eyes. But why would outside directors do this? Why break the law when there isn't any personal upside The only one who benefited was the CEO, and yet these outside directors put themselves on the line. Doesn't make much sense. In fact, the same questions come up in a lot of these situations. Unless they really feel their tenure out the board is threatened if they don't play along, or they all want to be the CEO's favoritist board member, it just doesn't seem worth it to engage in risky compensation for one guy, with so little personal benefit.


Japan Makes More Cars Elsewhere (NYT)
At this point, in most modern industries, it doesn't mean very much to assign a particular company a national designation as if they were actually a citizen of the country. The shares of many company's are traded on exchanges all over the world; they pay taxes in many countries; the components to their products are manufactured globally; and increasingly their manufacturing isn't even done in its so-called country of origin. We've been fascinating by the moves, in recent years, to bring Japanese auto production to the US, a move which only seems to be accelerating -- even a Chinese automaker is doing it now. For the first time, the Japanese are building more cars outside of Japan than they are in it. One wonders if, in the Japanese papers, politicians are sounding the alarm, talking about the fleecing of Japan, and how Toyota is being economically unpatriotic, as Lou Dobbs might say.
Google Searchers Worried About Stagflation? (Ticker Sense)
One day, Google is going to replace those silly surveys like the University of Michigan Consumer Sentiment poll, which asks, like 35 people in the Detroit suburbs whether or not they're optimistic about the economy and then reports the data as if it actually indicates something. In the future -- or even in the present -- all you have to do is see what search terms people are looking for. At the moment there's been a major spike in people concerned about stagflation, whose results are soaring. Interestingly, not many people are searching for the words recession or inflation, which from our cynical perspective means the average person doesn't know what the components of stagflation are. It's only a matter of time before the chief economist at your bank eschews any real research and just spends the day thinking up search terms to check. Soft Landing? Soft Landing + Housing? Over-Tightening? Wage-Push Inflation? Check 'em all out before you write your next report.
Arcelor, Mittal Contend With New Hurdle in Brazil (WSJ) Just when you thought it was safe to talk about steel sector consolidation, there's a new hangup in the merger between Mittal and Arcelor. Arcelor's independently traded subsidiary, Arcelor Brazil SA, insists that per company bylaws, it's entitled to the same buyout offer for the remainder of its shares, with the same premium afforded to Arcelor shareholders. Acquiring the highly-profitable unit would add over $6 billion to Mittal's tab. Arcelor's perspective is that the Mittal is not compelled to buy Arcelor Brazil because the bylaws indicate such a move only in the event of a change in control, not a merger of equals. The only good news is for steel pundits who now have something new to talk about.
Northwest Air Flight Attendants Reject Contract Again (NYT)
What is this, 2003? Labor woes at Northwest remain unresolved as the flight attendants have rejected the latest contract offer from management. The move puts the airline that much closer to a strike that could ultimately see the plug pulled on the company. What seems bizarre about the situation is how behind they are the rest of the industry at this point. Yesterday we discussed the surging US Airways, while United is the latest airline to turn a substantial profit. You'd think with these examples of strong turnaround, management and labor would do a better job keeping their eyes on the prize at Northwest. Apparently, you'd be wrong.
Markets brace for econorama (CNNMoney)
Damn, someone got a Venti at Starbucks this morning with a headline like that. To be fair, it's looking like a pretty slow day in business, other than a continuing stream of earnings reports coming out. Even the Times Business section is running articles about Mel Gibson and the use of the overweight sassy black women stereotype in the media. So, good luck today, don't let an econorama hit you on the head.

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