Opening Bell: 8.2.06

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Howard 'sorry' about rate rise (The Australian)
Now this is what we'd like to see more of from our political leaders. Australian PM John Howard has apologized that his country's central bank needed to raise rates. When was the last time you heard Bush say that? Never. If he did, knowing our system, there'd probably be some sort of crisis and Bernanke would tender his resignation. But it really shouldn't hurt anything -- a simple 'sorry' for a regrettable, but necessary event always softens the blow. During Howard's speech he also said to Australia, "um don't take this the wrong way..." and "nothing personal, but..." as well as "listen, it's not you it's me".
AOL to offer free Web services (Reuters)
Yay, now everyone who wanted an @AOL.com address for all these years but could never afford to pay extra for it can get it for free. Of course, it's not that we would ever want an AOL address, which frankly is a little embarrassing. At this point, the company's best hope is to become some sort of retro fad that appeals to the same people who in the middle of a really bad film ask, "wait, are we watching this ironically?". Meanwhile, Kodak reported its 7th straight loss, and announced that it's getting out of the camera business. Now they'll be made by Flextronics, though presumably still carry the Kodak name. Somehow these stories fit together, like people with an AOL account are probably the type to carry around a Kodak-branded camera.
Burger King posts net loss, though revenue rises (Marketwatch)
Burger King reported unexpectedly bad results last night, citing -- get this -- losses due to their recent IPO. Sorry, what kind of company loses money due to their IPO? Apparently the company had a one-time management termination, which cost is $30 million. Still, all is not lost. The CEO expressed optimism over its new value menu, which is gaining in traction all around the country. And the good news for consumers is that the company is exploring "competitive hours of operation", which presumably means late night BK Broilers after the bar.
4 ex-Merrill Lynch execs' convictions overturned (Houston Chronicle)
We have another shocking twist in the Enron story -- four Merrill Lynch employees have had their convictions reversed, which pertained to the so-called "Nigerian Barge" incident at Enron. The 5th Court of Appeals, which apparently never reverses convictions found the case to be lacking and overturned 'em. The real loser is probably this guy Dan Boyle, who for some reason never appealed his conviction. No word on whether he'll be able to take that route now, though one could imagine he's on the phone with his lawyers as we speak. While the deal may have been shady -- if you'll recall Merrill bought the barge, though with a verbal agreement with Andy Fastow to sell it back at a profit six months later -- the appeals court ruled that the employees did not necessarily do it just for personal gain, which is what the prosecution alleged. For more analysis, check out Houston attorney Tom Kirkendall.


Yukos files lawsuit against creditors' bankruptcy decision (RIA Novosti)
As much as it could be said that we're on Yukos' side (isn't everyone?) in their battles against the Russian government and others, eventually, everyone has to know when to give it up. One wants to read to Yukos C.P. Cavafy's poem "The God Abandons Antony", which is all about giving up with dignity and grace, and not holding on to false hopes: Above all, don’t fool yourself,/ don’t say it was a dream, your ears deceived you:/ don’t degrade yourself with empty hopes like these. /As one long prepared, and graced with courage,/ as is right for you who were given this kind of city, /go firmly to the window/and listen with deep emotion, but not/with the whining, the pleas of a coward;/listen—your final delectation—to the voices,/to the exquisite music of that strange procession,/and say goodbye to her, to the Alexandria you are losing.
Secretary Paulson in a remake of Rashomon (Cafe Hayek)
The new Treasury Secretary spoke on a broad number of topics in a speech yesterday to the Columbia Business School. He touched on the outlook for the economy, talked up the benefits of global competition and he even tried jibber-jabbering the Dollar around a little bit. Of course he totally contradicted himself on that last point. He said a strong dollar is good for the US, but that China needs to stop artificially keeping our currency strong. Uh, ok. It seems pretty obvious that when calls for a strong dollar are rarely grounded in any economic outlook other than "economic patriotism". And of course the New York Times picked up on a line he said about the economy not benefiting everyone, which the Times saw as a deviation from the standard administration script In reality, it's totally obvious and it hardly represents going out on a limb.
Phelps Dodge may raise cash portion of offer for Inco - report (AFX)
If you snooze for even a second you're gonna miss the latest twists and turns in the metal mining industry Phelps Dodge is considering "injecting" $6.75 billion more into the cash portion of its bid for nickel miner Inco. To be clear, the top-line buyout offer would remain the same, but more of it would be in cash, as opposed to shares. Phelps Dodge is locked in a fierce battle with Vancouver-based Tech Cominco for the company. And in case you missed it, on Monday, there was speculation that Phelps Dodge itself could be a takeover candidate, as rumors emerged that Grupo Mexico SA was soliciting advice about pursuing such a bid. Why the media covers anything but this industry remains totally baffling.
KKR, Bain, LBO Firms Pay Most for Loans in Five Years (Bloomberg)
In a way this should be a total non-story. Interest rates are at multi-year highs, so naturally the interest rates paid by LBO firms will also be at multi-year highs. But in light of the HCA purchase, which is nominally the largest leveraged buyout of all time (Nabisco remains the largest when adjusted for inflation), it's interesting to note that the cheap money that's fueled a lot of the boom isn't so cheap anymore. It's not just that rates are high, but with so much LBO activity happening, bankers in this area actually have some pricing power. It's pretty incredible to think that with so much cash sloshing around a cash seller would actually have pricing power, but that only enforces how large the pool of buyers has become. Up until recently, the article notes, spreads had become so low, that banks competing for activity were eliminating typical loan covenants (such as debt to cash flow ratio requirements) in order to lure borrowers.
Google, XM Satellite Radio ink ad deal (CNNMoney)
A lot's been made of the fact that Google is a one-trick pony, a company that's put out many products bad had few hits outside of its core search product. The company rarely makes deals with others. It doesn't go out and sign exclusive contracts with content providers, instead focuses on technology that allows searchers to find anything from anyone, which is ultimately a pretty good strategy. The company has now signed a deal with XM Satellite Radio to distribute audio ads into its non-music channels. It'll be interesting to see how this works, because it will be much harder to insert relevant advertising on the fly the way it can do with text. And advertisers won't have an easy way of tracking the ads success, the way they have with click ads. But if they can make it work, and serve as effective middleman or auctioneer for XM's ad inventory, it could mark the beginning of a lode to mine.

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