Opening Bell: 8.14.06

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Penthouse to the Outhouse (Barron's)
It appears increasingly likely, at this point, that Bill Miller's famous 15-year S&P-beating streak is going to come to a screeching halt this year. His Legg Mason Value Trust is 12% behind the S&P 500, having lost over 10% YTD. And while all streaks must come to an end, this could get a little ugly. Suddenly Bill Miller's out-of-left-field investment philosophy doesn't sound so ingenious. He might not want to say out loud, for example, that he takes his cues, in part, from the philosophy of Ludwig Wittgenstein. Dude, no wonder your down 10%! Seriously, all that stuff sounds great when you're cruising, but it really comes back to bite you when you're down. It's sort of like the CEO of a company that goes bankrupt. That old BusinessWeek interview in which he said that Jerry Garcia was the best CEO of all time should have helped investors see that the writing on the wall. Oh, and this summer Miller splurged on an enormous yacht. Nice timing Bill.
Wal-Mart executive sentenced (Arkansas News)
Going into Friday, former Wal-Mart exec Tom Coughlin was facing 28 years in prison for defrauding his former employer. He was also to pay a $1.35 million fine. But lucky for him, he has diabetes, sleep apnea, and hypertension and his lawyer successfully argued that prison wouldn't be good for his client (is it good for anyone?). Instead of the long prison sentence, Coughlin was sentenced to home confinement for 27 months, and only needs to pay $461,000 in fines. On Saturday, at the Beer Garden, a corporate lawyer insisted to us that criminal law was needed as well as civil law in the corporate world so as to prevent so-called "efficient breaches", breaches of contract which are worth it. Apparently, even when criminal courts are involved, you can make out pretty well. Meanwhile, a bomb threat was made at a Tennessee Wal-Mart. The retailing giant said liquids will be allowed in the stores, but that shoes will have to be left at the door, as they're doing the whole "Japanese thing".

If a Magazine’s List Doubles in Size, Is That Inflation? (NYT)

Never have we been more sure of our celebrity bubble thesis -- that there is an overabundance celebrities that nobody really likes, and an overabundance of capital poured into the industries that surround them -- than we are now. The ability for magazines and TV to mint new celebrities on a daily basis can only be compared to the dotcom bubble, when new paper millionaires sprang into existence on a daily basis. Then the companies had no profits, today these celebrities have no fans. Meanwhile, the magazines the stoke the fire have had to double the length of their annual 'beautiful people' lists. Vanity Fair jumped from 50 to 100. Several others are going with the century mark as well. Other magazines that never even had lists are getting into the list game. The Times asks if this is inflation. Yes, yes it is. Calling Helicopter Ben.
Stable Fed rate won't relieve consumer debt (Chicago Tribune)
It's only been a couple of days since the Fed paused on interest rates, and the rate cut drums are already being banged. That didn't take long. It's almost like economic advocacy: "Bet Ben, Millions of Americans are up to their neck in credit card debt, and have adjustable rate home equity loans, we need rate relief now!" Yeah, screw inflation worries. After all, wouldn't mass defaults and bankruptcies be far worse than a little bit of inflation? As one analyst put it, "Five trillion (in newly assumed household debt) was manageable when interest rates were low, but now consumers are facing a whole bunch of issues that make it more costly to continue spending." Meanwhile, the National Association of Realtors applauded the Fed pause. Wonder why.


Canada failing world's poor, report says (Toronto Star)
A new report from the Centre for Global Development gives the ol' "tsk tsk" to the developed countries for failing to do enough for the world's poor. That being said, we have this sneaking suspicion that the survey was politically loaded in an attempt to shame the developed world. For example, one of the chief measures of 'doing good' is giving lots of foreign aid, though foreign aid is basically an unproven method of helping. Meanwhile, actual trade, which has been shown to lift the poverty doesn't seem to get mentioned. But get this, the Centre does penalize Canada and the US for its subsidies and tariffs which hurt exporters in the developing world. So we'll get penalized for tariffs, but we won't get a positive for the enormous trade we actually do? Could anyone argue that the incredible upward mobility of the Chinese in recent years isn't do in large part to trade with the US? In actual rankings, the US came in 13th, Canada came in 10th, and the 1 slot went to the Netherlands (natch).
Goldman Loses Cachet in M&A as Companies Seek Multiple Advisers (Bloomberg)
On a percentage basis, the fees paid to Goldman Sachs for M&A advisory work is on the decline. Of the $802 billion the company advised on in the last fiscal year, the firm took in fees of %.31, which is down from %.37. This is due, in part, to companies bringing on more banks to help with the process. In the ten biggest deals of the year, seven firms were used, on average, to make it happen. Meanwhile, M&A is getting easier. Pretty soon, you'll be able to merge your companies using E-Trade for a flat $20 fee. At the moment, every firm wants in on every deal, just so that they can put the deal in their tally. But if this pursuit of numbers keeps hitting their rake, expect some savvy collusion in the future. Take note Spitzer, you read it here first.
Mexico Partial Vote Recount Upholds Calderon's Win, Parties Say (Bloomberg)
It appears that Mexico is finally sorting out its July 2 presidential election. That's not bad really, as it's about the same time it took for us to resolve the 2000 election, and they've recounted the entire country, not just Palm Beach County, in Florida. The recount confirms a win for the more conservative Calderon, which is a good sign for free traders and the business types. Seems rare for a Latin American country to stomach a pro-business leader for more than a few terms. Of course, the next one has to be a socialist/friend of Fidel. It's written in their constitution.
Prices at pump barely rise despite headlines (Bloomberg)
Weird stuff is going on in the gas market. Surprisingly, the disruption of the Prudhoe field didn't have an immediate disruption and didn't cause prices to soar. One analyst is citing the end of the summer driving season -- always one of our favorite phrases -- for the weakness in prices, but what about Labor day, the official holiday of summer driving? Can we assume, that to make a quick buck, all we need to do is buy before labor day and then sell the following Tuesday?
Beyond Petroleum (Ideoblog)
Law Prof Larry Ribstein typically uses the weekend to bash Times columnist Gretchen Morgenson for her knee-jerk, illogical anti-business screeds. Well, he did that again this week, but he also added the Times' Joe Nocera to his list, taking him to task for a recent column about British Petroleum. BP has left itself open, you see, to charges of hypocrisy for advertising itself as being 'Beyond Petroleum', when in fact they're still very much a petroleum company, and a dirty one at that. An explosion in Texas City, and the recent Prudhoe Bay pipeline breach demonstrate that it's still just a dirty oil company selling the dirty stuff. On these points Nocera and Ribstein agree. But while Nocera sees this as a problem, Ribstein doesn't. In fact the company is punished more now, in terms of brand quality, because its actions seem not to counter its advertising. All that money spent on being green is squandered, i.e. the company has been suitably punished for its disconnect. As Ribstein puts it "In short, advertising is a market mechanism for aligning shareholder and social interests."

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