Opening Bell: 8.30.06

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A Forecast for a Fork in the Road (NYT)
The Economic Cycle Research Institute has had a knack for calling tops in the business cycle, and accurately forecasting recessions. It saw the slump coming in the early 2000s, and the methodology it uses anticipated similar activity in the 80s and 90s recessions. At this point, the economy is at a proverbial fork, or crossroads, and the institute says there's a 50-50 chance of a recession in the next year. Meanwhile, with the economy at a fork, the Fed finds itself fractured. The minutes to its last meeting reveal broad dissent over the direction of the economy. It's too bad there has to be just one answer. Perhaps the optimists could just go their way, and the pessimists the other, and both deal with the consequences.
Google CEO Schmidt joins board of Apple (San Jose Mercury News)
The tech press is in a hot lather over news that Google chief Eric Schmidt has joined the board of Apple Computers. Some are speculating on what the move means. Will the two companies form some sort of grand alliance to take on Microsoft? Will Google buy out Apple? Will everyone please shut up? Thank you. Nobody has any idea what it means. CEOs are always on the board of other companies, and it rarely signals any sort of meaningful alliance. In fact, were the two companies going to link up in some way, it's unlikely that they'd telegraph it like this. Hey, did you know that Al Gore is on Apple's board, too? Maybe he'll make the MacBookPro the official computer of the federal government after he's elected President. Of course, if you watched the West Wing, you'd know that a Democratic administration means Macs in the White House.
'Small-Marts' take on Wal-Mart (Fortune)
This is the type of article that we'd typically make fun of, but we're in a charitable mood this morning, so a different tack is to be taken. Various groups, which for some reason Fortune dubs 'Small-Marts" are increasingly girding up to do battle against the Bentonville behemoth. The small-marts include local farming groups, which raise the typical hay about supporting the local economy, and eating in a sustainable manner. Now, buying local is a sham idea, along with buying USA. And sustainability is a total red herring. Those opposing Wal-Mart point out that with energy costs so high, it doesn't make sense to ship food from across the globe. We've heard this argument before, and it's flawed. If shipping around the globe were so inefficient it wouldn't be cheaper. If eating locally were more efficient, it would be cheaper. That being said, if local, small farmers and retailers want to compete with Wal-Mart, they should do so on the basis of offering some superior combination of price and quality. Depending on rhetoric and politics to sell a potato is a sure loser when it comes to buying and selling.
Pocket of Pain for Young Graduates (BusinessWeek)
Paging Anya Kamenetz! Here's something you can write up for your Generation Debt column, or whatever it is you're doing for the Times these days. Or you can just include it in the next edition of your book. Either way, the average wages of recent college grads is slumping again. Turns out that having just a B.A. isn't so lucrative, and maybe it's because of some grand conspiracy to suppress the earnings of young people. Maybe it's because young people don't vote, so politicians pass policies that hurt their ability to earn. Or maybe it's because more and more people are going into stuff like studying art or social work. Perhaps it's because as the economy evolves, having the same degree isn't as valuable as it was, and now people are expected to get more training. And then of course, there's the fact that there' a lot of people going to college these days, which probably means a dilution of the quality of the average college graduate. Not to mention the fact that it's just not that special to have a B.A. Just throwing some ideas out there for you.


Inco spurns CVRD bid, sticks with Phelps Dodge (MarketWatch)
The board of nickel miner Inco formally rejected CVRD's bid for it, and urged shareholders to accept an earlier proposal from Phelps Dodge. Does this mean the game is over and Phelps will emerge victorious? Not likely. For one thing, Inco shareholders aren't compelled to listen to the board, and with CVRD offering much more cash, many shareholders will want to take the money and run. For another, there's no guarantee that Phelps Dodge shareholders will approve the plan, should Inco agree to a deal. A hedge fund that owns 10% of shares has already expressed its disapproval. And, of course, CVRD won't roll over and play dead. They're still confident of victory, probably with good reason.
Putin Approves Creation of World's Top Aluminum Maker (Bloomberg)
The metal wars would be so much more boring if it all took place in Russia. In the developed world, we have hostile bids, three-way mergers, boards with interests opposite of shareholders, and mergers that take place over multiple continents. In Russia, it's all much more simple. Putin wakes up one morning, takes a shower, washes his armpits, and then in a moment of epiphany (uninformed by market forces) decides that the aluminum sector needs consolidation. So that's what he does. He makes a few phone calls, and by the time dinner is on the table, it's done. We pity those who are writing Dealbreaker Russia.
In Strategic Shift, China Hits Foreign Investors With New Hurdles (WSJ)
It's funny; there are actually people out there who think that China is eating our proverbial economic lunch. That being China, the country where employees stand in line in front of creditors during bankruptcy proceedings. Right, Communist China, AKA Red China. And, of late, the company has been increasing its restrictions on foreign activity in the country, making it harder for banks and retail operations to expand aggressively in the country. What's funny is that the story is supposed to be written in the opposite direction. Isn't it China with the hundreds of billions of greenbacks lying around that will soon swoop in and buy up half the Dow Jones? Isn't it supposed to be Chuck Schumer putting forth laws like they are in China?
HP chief Mark Hurd goes on a customer safari (Silicon Valley Sleuth)
HP CEO Mark Hurd showed up at a San Jose Best Buy to do a surprise meet and greet with potential customers, in a move that will certainly earn him praise for getting out there and getting in touch with the people. If he actually learned something about customers, that's great. But who wants to be paying the CEO $1,000/hour to be out there glandhanding Best Buy shoppers. Get back in there and make some deals! We have it on good authority that from to time, John Mackey the CEO of Whole Foods goes out into the parking lot of the Austin, TX flagship store to push shopping carts. What a man of the people! Get back in there, and figure out where to source more organic figs.
Euronext profit rises 63%, still falls short (MarketWatch)
It's been awhile since there were new stories about new stock exchange mergers almost everyday. As it is, some of those mergers announced a few months ago, continue to plug along. EuroNext announced expects its merger with the NYSE to finalized in q1 2007, with a December shareholder meeting to vote on the deal. The group's profits rose 63%, though analysts had expected more.

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