Skip to main content

Opening Bell: 10.17.06

Sponsored by
Wal-Mart Said to Be Acquiring Chain in China (NYT)
According to those involved, Wal-Mart is set to plunk down $1 billion for a retail chain in China that would instantly double its presence in the country. Wal-Mart's got big ambitions for China. As one analyst put it, it's the only country in the world where the company could conceivably replicate its US experience. But it'll be no picnic. It's going to be harder to undercut the competition the same way it can here. Instead, it's going to have to market itself on the basis of product quality and reliability, something that American shoppers might be surprised to hear. And of course, it still has to compete with WuMart, a fast growing Chinese retailer that bears a similar looking brand and slogan.
UnitedHealth's McGuire May Face Criminal Charges for Backdating (Bloomberg)
Quick! Run to Namibia before it's too late. Securities experts think the former UnitedHealth CEO, who yesterday resigned over options backdating, might face criminal charges. It's getting rather difficult to figure out who might face charges, and who won't. It seems that if you resign right away in apparent disgrace then you're almost signalling to the public that you're a criminal. Whereas if you hang on for awhile, then perhaps you weren't as central to the case. Seems rather arbitrary. And has anyone else noticed how often the word retire is used to talk about CEOs who resigned? Ok, yes, technically it is retirement, but it's an awfully favorable way to put it.
Oil prices up as OPEC nations prepare to trim supply (Reuters)
It's already getting colder. Fall is always such a short season. In just a matter of weeks, we'll be headfirst into "winter home-heating season", or as most people call it "winter". But to the reporter writing on energy issues, it's always important to emphasize that with a new season comes a lot of need for energy. That's what makes a story about OPEC potentially cutting supplies "right before the high-demand winter home-heating season" interesting. OPEC itself is actually anticipating weak demand going forward, which is the reason for the drop in prices, and thus the panic. And in all likelihood, with demand slowing down, and oil revenues coming in lower, it's going to be tough for member states to abide by any cuts. It's easy being a cartel when demand is soaring. On the way down, not so much.
Ford to Drop Fidelity Magellan From Employees' 401(k) Plan (WSJ)
There was a brief moment in history -- a strange one -- when the Fidelity Magellan fund carried with it an incredible brand caché. People would instantly know what you were talking about if you told them you had money in the The Magellan Fund. It was so strong and well-known that Magellan almost became synonymous with mutual funds, in the way that Google and Kleenex have come to define their industries. So people who had some non-Magellan fund, would just it call it Magellan. Well, if there was life left to that era -- which there isn't -- it's getting killed once again, as Ford announced it would drop the fund from Employee's 401(k) plan. The fund has had a rough time of it, and several other companies, like Microsoft, have also dropped it in recent years.

Russia Threatening to Revoke Lukoil Licenses (NYT)
Russian regulators should strike fear for any oil company chief. They're all a minute away from being nationalized, and the already nationalized ones are all a minute away from seeing their assets transferred to another company. So it's bizarre that a Russian environmental minister has been warning companies about revoking certain licenses due to failure to drill in a timely manner. At issue, is whether companies who receive licenses from the state, to drill on a certain field, are doing so quick enough. As the minister put it "no drill, no jobs, no taxes", no joke. That being said, with energy on the decline, the state's leverage over oil companies declines. It increasingly needs outside investment, and has less sway over them.
Google to convert HQ to solar power (AP)
In keeping with its green -- and blue (as in Democrat) -- image, Google has indicated it will build a large solar energy system at its headquarters. And although the move should help burnish the company's image, it probably makes sense from a business perspective. The company uses lots of energy, which makes for a volatile situation during a time of potential price swings and weakness in the California grid. Just yesterday, there were fresh reports out that the electrical grid could see failures in the future, as the pace of new plant production has been slow. Granted, we're guessing that Google already has its own backup power generators that could last for some time. But still, being set high on a hill in sunny California seems like a good place to install some solar panels.
Wright Amendment phaseout nears after Bush signs bill (Today In The Sky)
Laws pertaining to local airports aren't often national issues. In civil aviation, all politics tends to be local. But the famous Wright Amendment, which limits the flights out of Dallas' Love Field, has been a national issue for some time. Southwest, which makes its homebase at Love Field (LUV, get it?), has always been stifled by the law, much to the pleasure of competitor AA, which calls DFW airport its homebase. After years of wrangling, Bush finally signed a law eliminating the Wright Amendment, and soon the phaseout will begin. The law won't be completely gone until 2014, but incremental changes, allowing Southwest to expand its offerings from Love Field will begin shortly.
Stock Exchange fends off predators (The Guardian)
Several months ago, a day wouldn't pass that didn't see some sort of merger or proposed linkup between two stock exchanges. That's slowed down a bit, in part because there weren't that many left that hadn't done a deal. The NASDAQ has been going after the London Stock Exchange (LSE) for sometime, and quietly built up a 25% stake in the company. But since then it's gotten nowhere, which is exactly what the LSE wants. It's been doing everything in its power to avoid a merger or takeover, and in so doing has seen a nice boost to its share price, potentially making a buyout prohibitive. Still, it's a juicy prize, and it's hard to see it staying on its own forever.
Trading, BlackRock Gain Buoys Merrill's Quarter (WSJ)
Congratulations to Merrill Lynch for turning in a solid quarter that saw the company deliver $2/share in earnings, excluding the recently acquired BlackRock. The company's investment banking division delivered 21% growth, and hit a new quarterly record. Merrill also tuned in some solid trading numbers, which appear strong compared to its peers, in part because Merrill's quarter ends a month after its competitors, so the company captured more of the recent rally in its results.