Skip to main content

Opening Bell: 10.2.06

Sponsored by
Online gaming's luck turns sour on US ban (Reuters)
It's been a rough year for European online gambling firms, to be sure. First, two of their chief executives were arrested in the US. Now, their business is in serious trouble as the Senate has passed a ban on payments to online gambling companies. Oh wait, the Senate didn't exactly pass such a ban. Rather, Senate Majority Leader Bill Frist slipped the ban into a larger bill about port security so that the family values candidate could get one of his pet issues passed without any debate. Who wants to vote against port security one month before an election? American democracy has become something of a strange bird, no? Good thing we ran out of money on sometime late Saturday night.
Harrah's Entertainment reportedly in deal talks (MarketWatch)
Meanwhile, who's the biggest winner of Congress' preservation of family values? The brick and mortar casinos, of course, who have just seen a major rollback in the competition. Their shares are already edging up on the good news. And with perfect timing, there's rumors that Harrah's is close to being taken private, in what would be one of the all-time largest LBO deals. The company's market cap is $12 billion, with another $10 billion in debt. The private equity firms in talks with the company say that the odds on table games are too generous at the moment, so they see tweaking the rules as a potential major efficiency improvement.
Morgan Stanley Gives Employees Incentives to Avoid Defections (Bloomberg)
Morgan Stanley is looking to re-define excellent benefits. The bank, which has a hard time holding on to top talent, is looking to offer top traders the opportunity to buy into hedge funds and private equity funds, with the company lending $2 for every $1 contributed. Yep, that definitely beats your 1-to-1 matching on your 401k; and you thought you were lucky because you could invest in a global fund. And, since the whole idea is to hook them in and keep them there, anybody leaving before three years will not be allowed to take their profits on the investment.
Cost of saving the planet: a year's growth (Guardian)
Consulting firm PricewaterhouseCoopers says the world will have to a sacrifice one year of growth in order to take the necessary measures to stave off the global warming threat. Ok, let's put aside any skepticism about global warming, the human causes, or whether this number is accurate. Let's assume it's all true, and that we urgently need to set aside one year of growth. Ok, how do we do it? Can we actually stop growing for a year? Do employees take a pledge not to become more productive, or to birth more children? Do scientists and technologists sign a 'no-breakthroughs" clause in their contract? Or do we simply have to pay into some environmental remediation fund the fruits of our marginal increase in productivity. So if we get a 5% raise in a year, and 3% of that can be associated with skill growth, can we keep the 2% part that was just due to inflation? Perhaps we're jumping the gun, but it seems like this needs to be worked out before the report can be taken seriously. But if they promise that this will save the world, and that it's absolutely necessary, then we can be amenable to the plan... but only if the remaining 6 billion people in the world agree to it first. We're not gonna let you free-ride off of our growth sacrifice.

The Brashness Is Back in Money Talk, and Also at CNBC (NYT)
Somebody has been snoozing through the Mad Money era. But now that the station will continue airing Fast Money, in addition to Mad Money, there's no denying the fact that loud, quick payoff shows are where it's at. There's some truth to the idea that in most serious business programming, there's not a whole lot of payoff. Who was ever helped by some 'noted Fed watcher' prognosticating on what Bernanke would do over the next three Fed meetings? And with the market racing towards all time highs, perhaps people realize that getting rich quick is the only way to do it, as getting rich short just takes too long. That being said, if you think CNBC is brash now, imagine what it'll be like when it's in a pitched ratings war with Fox Business.
Russian firms merging to challenge Alcoa (MarketWatch)
The Russian commodities sector is so large, that the process of internal consolidation basically has a consolidating effect on the industry globally. Rusal Ltd is acquiring the assets of Sual Group as well as Swiss concern Glencore International, in a move that would create an Aluminum behemoth to tackle some of the world's largest players, like Alcoa and B.H.P. Billiton. The company would then move its shares to the London market, where it will raise further money... probably for more acquisitions.
Wal-Mart to Add More Part-Timers and Wage Caps (NYT)
Wal-Mart's been engaged in a steady PR march to improve its image with populist measures like reducing the price of prescription drugs for $4 a bottle. But, nobody likes the company's use of part-time labor, which isn't eligible for benefits (unlike part-time workers at a good company, like Starbucks). Nevertheless, the company is upping its use of part-time labor, and imposing wage caps, and scheduling people for more shifts on weekends. None of that is particularly fun, of course, though by all appearances it appears to be voluntary, which is good. Perhaps to make it up to the workers, the company should allow them to invest a share of their wages in hedge and private equity funds. You know it's only a matter of time before Wal-Mart gets into that too.
PR Newswire Acquires U.S. Newswire For Up To $23 Million (PaidContent)
Dear OligopolyWatch, can you do a survey of the newswires industry? The sector -- who's economic importance just has to be diminishing -- is in rapid consolidation mode. P.R. Newswire has announced the acquisition of U.S. Newsire, which comes a couple years after BusinessWire was acquired by Berkshire Hathaway. The newswire industry may seem a little quaint, but people in P.R. haven't gotten past blast marketing yet. The name of the game is still get your story in as many people's hands as possible, hence the existence of PR spam, which can fill your inbox quicker than counterfeit drug spam.
Pier 1 chairman and CEO to retire in February (Reuters)
Ever since the clock struck midnight on December, 31st 1999, it seemed that Pier 1 must be living on borrowed time. The quintessentially 90's retailers has struggled over the past several years, famously trapping value investors like Warren Buffett who was convinced that there had to be something there. But it seems not, and now the company's CEO is leaving for greener pastures (probably a golf course) as well. Will private equity ever be interested in this one?