Opening Bell: 8.11.06

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Airline and travel company shares rally (AP)
In Europe, investors have brushed off fears of a travel slowdown, and are buying up airline and travel shares. It's widely anticipated that airlines, which have been enjoying an excellent summer, won't see much of a slowdown, despite news of the foiled terrorist attempt. Hard hit, however, could be companies like LVMH, which sells a lot of perfume and alcohol at airport Duty Free shops. A ban on liquid on planes hits that business hard. Now granted, it's nice to get a decent price on a bottle of liquor, but for the burden of placing something that heavy in a carry on, it never really seemed worth it. In fact, the whole Duty Free experience tends to be a big let down. You go in to this glowing, glistening place, and for the most part there's nothing you want to buy. Maybe someone should open up a Duty Free Nike store, as this latest attack is bound to take the attention off of the lingering shoe threat.
A Wall Street Rush to Patent Profit-Making Methods (NYT)
Have you come up with a sick arb and written a software program to instantly identify such opportunities in real time? You better patent it. After all, the worst thing that can happen to the success of a strategy is to see it repeated. Once everyone knows about, your little exploit will dissapear. Keep doing it for too long, and you'll start to lose money. But if you could license out the method, or just block people from doing it, then you've got a cash river. This is the where Wall St.'s going. The Times throws out some interesting statistics about the staggering rise of patent applications among major banks. In 1997, 927 patents were filed; last year there were 6,226. It's a good thing that hedge funds can't advertiser. Otherwise we'd be constantly hearing about some manager's "patent pending" method, as though he were pitching a new kind of blender on a late-night infomercial. And withing all of these patents, there's bound to be some obvious stuff, like the bank that has the patent on identifying low P/E stocks, or paying more for growth. At the moment, there hasn't been much suing between banks over infringement, but it's probably just a matter of time.
Economy Often Defies Soft Landing (NYT)
In the months prior to the last recession, we were driving in a rural area of Florida, and we looked up to see a neon sign at a gas station that said "pray for a soft landing". Apparently nobody took the sign serious so nobody prayed, and we didn't get our soft landing. So here we are again, and it's 'pray for soft landing time' once more. And once again, nobody's going to pray, except maybe the Fed, but that's never enough. In reality, soft landings don't really exist. There are periods that we've ex post facto called soft landings, but during them we're not like "yeah, that was niiice soft landing, let's give the pilot our applause".

Red, White Or High-Octane? (Forbes)

Earlier this week, we mentioned how obnoxious it was when someone chimed in, during a conversation on oil prices, about the price of some other, totally unrelated, consumable beverage that costs far more than $77/barrel, as if that in itself demonstrates that the whole concern about oil prices is utter gossamer. Of course, if oil and said beverage were actually substitutes for one another, that'd be a different story. If we could actually run our cars on Coke that'd be pretty nice, but Coke is really just corn syrup so, er, hmm.... maybe we could get some subsidies to experiment with Coke fuel (and no, not that coke fuel, which is probably subsidized in some way). After all, it'd help farmers in Iowa. But we digress. Many governments of wine-producing countries are offering subsidies to vintners who use their unsold drip as fuel. So perhaps Mr. "have-you-checked-the-price-of-(insert beverage her)-lately?" actually has a point, but almost certainly one that was arrived upon accidentally.


U.S. Trade Gap Narrowed in June (NYT)
Which is more important, the health of the economy or the trade deficit? Most people would probably like to see a strong, growing economy, but there are some who are so concerned that we're selling the nation to the Chinese, that a showdown in growth is a good thing if it means buying less stuff from overseas. Not that the trade deficit is really slowing down much. In June it hit $64.8 billion, just shy of hte $65 billion from may, though the non-oil portion declined more significantly. For the most happening discussion of trade data in town, check out the blog of Brad Setser.
Tax receipts help lower federal deficit in July (Chicago Tribune)
Speaking of deficits, not only did the trade gap narrow, but higher taxes contributed to a sharp drop in the federal government's monthly deficit. The government now expects that its fiscal year ending Sept. 30th will so a total deficit for the year of (drum roll) $296 billion, as opposed to the $423 billion it booked last year. If you believe the administration, it has something to do with tax cuts actually increasing federal receipts. Of course, since the government spends our money so terribly, what's so great that more of it is going to the government? Wouldn't we be better off if that money has been spent on stuff we actually want? From China, even?
Brazil's CVRD Set to Launch $15.1 Billion Bid for Miner Inco (WSJ)
Everybody wants to take Canadian nickel miner to the dance, and unfortunately, unless it plans on some crazy antics only possible in movies it's gonna have to just chose one partner and stick with it. Already, Phelps Dodge and Teck Cominco have bids on the company, and now CVRD, from Brazil, is getting ready to make a bid. Analyst see Phelps as likely to drop out, as their stock-heavy offer doesn't appeal to many Inco shareholders. Of CVRD and Teck Cominco, Teck has the higher offer, though CVRD may be able to offer more cash, if not eventually offering all-cash.

Class and power (Stumbling & Mumbling)

The term 'working class' doesn't make a whole lot of sense. Like when somebody says "that's a working class part of town', what does that mean? Sometimes it seems to be a code word for blue collar, but since the vast majority of people work in some form or another, the term should include a large swath of people. Chris Dillow lays out a simple test: does your economic fate hinge on someone else? If so, you're working class. This writer could get kicked back to the blogspot circuit in an instant. Whereas someone who makes their living by trading the market probably couldn't. Working class then is about power, and it may be a surprise then, that there are plenty of people who are extremely well of who don't have any power at all.

BETonSPORTS throws in the towel (CNN)

It was only a matter of time before BETonSPORTS, whose ex-CEO is currently in a US jail, would have to throw in the towel. The company is boarding up its US operations, which are thought to account for 95% of the company's profits. And while you might think the company could just go on at 5% of its original size, it will probably need to sell off the remainder of its assets, to satisfy creditors, meaning the company is finished. This must be what Ralph Nader-types mean when they talk about the corporate death penalty.

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