Opening Bell: 10.10.06

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Private-Equity Firms Face Anticompetitive Probe (WSJ)
The Justice Department has launched a probe into possible misdeeds in the private equity industry, the Journal has learned. So far, the bureau is in the document-requesting phase (i.e. fishing expedition phase), as it has sent notices to the likes of KKR, Silver Lake and others. It wasn't hard to see this coming. Several of the biggest deals, of late, involved multiple firms. And considering that there aren't that many big players in the space, coordination can't be too difficult. The goal is to avoid the "Winner's curse", the unavoidable fact that in a multi-party auction, the party that wins is the most likely to have over-bid. Still, not even out-and-out collusion could make a company sell for a price it didn't want, so any allegations of anti-competitive behavior should be weighed in this light.
Scientists Probe North Korea Nuke Test (AP)
The last thing the world needs is a humiliated Kim Jong Il, but there appears to be growing doubt that North Korea actually tested a nuclear bomb. Or if it did, it was either very small or a total dud. Maybe this is good news politically, but it's not good news for the Dollar, which sold off due to the calm reaction around the world to the blast. As one analyst from Morgan Stanley put it, "The nuclear test does not necessarily mean North Korea immediately launches an atomic bombing on Japan." That's good. It's not clear what lasting effect the test (if it actually occurred) will have on the North Korean won, which up until 2001 was sold at a fixed rate of 2.16 to the dollar, a level apparently determined by Kim Jong Il's birthday, February 16th.

Oil Rush Lures Small Investors (WSJ)

You have to have some respect for the small investors who aren't satisfied with an energy ETF, or just buying oil futures from an electronic oil exchange. Some of them don't like dealing in paper and fiction, and deliveries that they'll never deliver, and receivables that they'll never receive. Instead, they just have to own the well outright. The idea of selling wells directly to naive investors with the promise of riches is an old one, and if you go to Texas, you'll find a lot of people with a well or two in their family. Well, the trend is back, and once again, people are snapping up wells. Of course, the timing has been atrocious. Already, royalty checks are plummeting, and production seems likely to slow at many of these. This is not to mention that inevitable well that turned up completely dry, which has to be frustrating. Still, perhaps it's all worth it, just for the site of one gusher, spewing Texas Tea all over a corn field.
China Sany wants to build plant in U.S.-executives (Reuters)
The ongoing trend of Asian manufacturers setting up shop in the US continues The newest one is China's Sany, a maker of heavy machinery, which says it's looking to open up a manufacturing facility in the US. Considering the pace of new factories being opened by both Japanese and Chinese companies, it's really hard to make the argument that the US just isn't a good place for industry.


Trump: China trade wrecks U.S. jobs (Reuters)
Donald Trump, if you're so rich, why ain't you smart? Notice the clever inversion of a tired cliche. The problem with Donald Trump being a crossover pop-start, is that many people assume that he is one of American's finest businessmen, and that he really knows what he's talking about when he spouts off things outside of real estate. He sound really silly when he starts harping on something like the "shrinking middle class", which he says is due to trade with China and the disappearance of manufacturing jobs. Besides, Donald, aren't you going to teach all of these out-of-work middle-class folk how to become real estate millionaires when you speak at the Learning Annex Real Estate Wealth Expo?
Has the dot.com boom returned? (BBC)
Has the dotcom boom returned? You might think so if you were watching developments out there from the other side of the pond. Young companies with small revenue streams certainly have been selling out for a lot of money. But, notice, none of them have ".com" in their name. It's not YouTube.com, it's YouTube. Skype, which sold to eBay for billions, isn't even a browser based service... so how could it be a .com? So, take heart the .com boom certainly isn't back, though that doesn't mean there isn't some new boom. Note that when Google bought YouTube yesterday, it's stock rose. Call us old fashioned, but when you spend $1.65 billion for any company, let alone an unprofitable one, your stock is supposed to drop.
Massive diamond gets massive price (Mineweb.net)
As pretty as they are, it's a good thing we don't have a diamond-backed currency. Every once in a while, some miner comes to the surface with a 603carat diamond, which fetches a market value of $12.63 million. The presence of this diamond would be a shock to the system, instantly causing inflation, as all other diamonds would have to adjust downward. Congratulations to the miner who carried the rock out; he received a $10 bonus.
As Religious Programs Expand, Disputes Rise Over Tax Breaks (NYT)
Around New York, it's not hard to see the fruits of the special status afforded to religious institutes in the tax code. How else could enormous churches, which only have (non-paying) customers once a week, afford to sit on such valuable Manhattan property, except for the fact that they don't have to pay property taxes? And now, churches are realizing that their tax-exempts status is good for more than just getting their praise on. Churches are building businesses, like housing communities, on tax-exempt land -- testing the patience of a society that already gives the group some nice perks. It's not a whole lot different than taking a company private to avoid the Sarbanes-Oxley tax. If you make something a religious asset, you can perform the same function for cheaper. Perhaps banks should step up and fill this niche, finding deals that allow private businesses to be taken over by tax-exempt churches.
MySpace Co-Founder's Suit Is Rejected (Dealbook)
Last week MySpace co-founder Brad Greenpsan released a long "report" detailing why the MySpace sale to News Corp. had been a fraud. That was good timing, because his original lawsuit over the deal has now been dismissed. He's hoping that a federal investigation will now look into the matter, but that seems unlikely. And his goal for the whole thing is to see MySpace "unwound" from News Corp. and return as an independent company seems verrrry unlikely.

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