Opening Bell 10.12.06

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Morgan Stanley Fallout From Andy Xie E-Mail Costs Two More Jobs (Bloomberg)
Last week, Morgan Stanley economist Andy Xie was forced to resign after an email of his leaked suggesting that Singapore was a hotbed of corruption. The bank probably wants to keep doing business in Singapore, which is why he had to go. The fallout continues as the firm has axed two more employees who merely forwarded the email. One of the fired employees, Celicia Ong, is an equity salesman, and counts among her clients the Government of Singapore Investment Corp. Fortunately, for the two employees, their resignations won't go into effect until January, ensuring that they get their 2006 bonuses. Bonus!
Discounters Go on Road to Find New York Style (NYT)
Target has a pretty good thing going with its mass-market designer goods, like slick, cheap toasters made by interior decorating gurus. But for the most part, its rivals haven't been able to emulate this, and there's not a lot of cutting edge style sold at places like Wal-Mart, Kohl's and Sears. So, after years of failing to attract hip, young designers to their headquarters in places like Wisconsin and Bentonville, Arkansas; the companies are opening up design studios in New York, to get access to hip, edgy design. It's a good move. As stores like American Apparel and Japan's Fast Retailing (which runs Uniqlo) have shown that clothes can be cheap and painfully simple while still being stylish and reasonably well made. Still, if you're a young designer working for Wal-Mart, we'll forgive you if you say you design your own stuff that gets sold at A-Life.
U.S. Deficit Is Smallest in Four Years (LA Times)
The Republicans touted new deficit data that on its surface suggests the deficit is narrowing. Bush cited his tax cuts as the key economic stimulus, which then brought more money into government coffers. What's weird about this is how often this "less taxes=more tax revenues" meme gets repeated, as if it were a) absolutely true and b) a good thing. Since when is it good for the government to get more tax revenues? Shouldn't we worry about what the government will do with so much money to spend? And, yeah, we still have a $248 billion deficit. But the good news is that deficits don't matter.
Insurers Get an Earful From Senator (NYT)
Hint to the insurance industry: don't deny a Senator's insurance claim. Turns out that Senator Trent Lott was one of the thousands of homeowners to claim damage from Hurricane Katrina. And you'd think that a Senator would get the red carpet treatment, and get reimbursed at 150% of the damages, right? Well, perhaps in the confusion of the time, his company wasn't very helpful, and has been fighting the claim. Bad idea. Now he's launching an investigation into several aspects of the industry, including whether it's in violation of anti-trust regulation, and whether insurance companies are paying there fair share of taxes. There's that cliche about the way to get a conservative is to mug or tax a liberal. Apparently, the way to get a neo- Chuck Schumer is to dick around with Trent Lott's insurance claims.


PepsiCo's Profit Jumps 71 Percent on Gatorade, Frito-Lay Snacks (Bloomberg)
While Coke still tries to figure out how to be more than a Coke company, its rival, Pepsi, is going a pretty good job diversifying away from the brown stuff. Granted, it's easier Pepsi. Nobody in their right mind would think a whole company could be built on the back of Pepsi-Cola, whereas Coke is a strong enough product to do so. The company has made several smart acquisitions over the years, not just in drinks -- where it's marketing healthier alternatives to sugar water -- but in "health" foods like dried pita chips. Pepsi showed some surprising insight into consumers when it went into that line; who else knew that people eat that stuff?
Crude Oil Price Rises as Traders Expect Surging Demand in China (Bloomberg)
Perhaps cude oil is getting a little bit oversold, but it's hard to believe that after weeks of rapid declines the price of a barrel of oil jumped by $.35 because of the long-term demand outlook out of China. Sure, long-term, there's going to be plenty of demand out of China, and it's going to grow for sometime, barring some type of economic collapse. But to suggest that this is what caused a small jump in the price of oil seems suspect. As for OPEC, there's a sense of doubt that it'll get its act together to enforce production cuts. Things are a little bit harder on the way no down.
BofA raises the stakes in online broking (Financial Times)
Shares of pure-play online brokers, such as e*trade and Ameritrade fell yesterday on news that Bank of America would offer commission free trading for accounts with at least $25,000. No doubt about it, the cost of a trade is going to zero. One of the big losers is the still-in-beta-testing Zecco, a startup promising free trades in exchange for some advertising. Somehow, we think people will be much more comfortable parking their money with a name like Bank of America than Zecco. So, obviously Bank of America will try to woo its online clients with other products that it will charge for. And we'd imagine that some sites will offer free trading, while charging for advanced tools, or complicated trades.
Yahoo's Talks With Facebook Get Bogged Down (WSJ)
When Google bought YouTube, the move was characterized as aggressive and bold. Yeah, it was expensive, but it was for a company that's dominating a nascent industry that's rapidly growing in importance. Meanwhile, for Yahoo, it all looks reactive and defensive. The perception is is that they have to do something to match, like... buy Facebook. Of course, Facebook isn't doing the same thing as YouTube, and online video is much more exciting -- at the moment -- than a site that lets college kids hook up with each other. Anyway, the rumor is that the companies are still in talk, but that thing are going slowly.
German govt agrees possible plan to take EADS stake - report (AFX)
This is just what EADS needs. Rumors are that the German government is looking to buy a stake in the company, so as to bolster the country's interest in the aerospace firm. Meanwhile, if you want to understand the folly in all this a bit better, the Washington Post had a good column yesterday about how much politics was damaging Airbus.

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