Opening Bell: 10.27.06

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Bank sues Tokyo exchange over 'fat finger' blunder (Times Online)
Remember last year's 'fat finger' error, when a trader at Japan's Mizuho securities inadvertently offered to sell 610,000 shares of a company at 1 yen, as opposed to 1 share of the company at 610,000 yen? It ended up costing the company 40 billion because it couldn't cancel the trade, and the entire trading staff went without bonuses that year. Well, it's now filing suit against the Tokyo Stock Exchange, since the exchange admitted early on that the mistake was partially their fault. The trade should have been cancellable. The real story, which the article notes, is that it's not a very Japan-like move. You don't hear much about lawsuits like that there. If it had happened here, sure. There'd have been lawsuits the next day, probably from like 15 different parties all claiming to be affected.

New-Home Prices Fall Sharply (NYT)

Continued weakness in the housing market prompted homebuilders to dramatically slash prices so as to reduce their inventory. In addition, they had to experiment with incentive programs as well, when lower prices weren't enough. In fact, builders aren't crazy about lowering prices, because it makes homeowners think they'll go lower, so incentives like "free upgrades" (!?) are becoming more common. It's beginning to sound like the US auto industry. Soon they'll be offering cash back, interest-free mortgages, and employee pricing. And once they go down that road, they won't be able to get out of it; even when things are strong, homebuyers will demand some modest cash back for their troubles.
Microsoft profit, revenue climb 11% (MarketWatch)
We just keep waiting for the other shoe to drop with Microsoft. Nobody believes it can really be a rapid grower anymore; instead its constantly on the defensive as new alternatives threaten take down many of its core businesses, that use to be virtual monopolies So, it's with some relief that the company managed to exceed expectations (on the back of good server sales), and guided positively going forward. Its only division that is actually growing rapidly is the XBOX, but the bast that can be said about it is that it's not losing as much money as it used to. Oh, and the company has some chintzy iPod knockoff coming out. Yeah, that'll sell.
New York Isn't the World's Undisputed Financial Capital (NYT)
The Times runs a scare piece today, throwing out the idea that perhaps New York isn't the center of the finance world like it used to be. We can't help but feel like we've read this story one too many times. Maybe it's just we've seen a lot of versions of it, like Silicon Valley is no longer the heart of technology, or the US dollar is no longer the world's currency of choice, or English is not the official language of business anymore. Granted, we'd expect that over time other cities became important. Yes, SarbanesOxley has thrown some more IPOs over to London. And two Chicago-based exchanges just merged, so now there's one big one over there. But neither of those things feels all that big or fundamental. On the other hand, complacency isn't a good thing, and if undue regulatory burdens are undue, well then they should be undone. Still, nothing we're worried about here, yet.


Isn't Competition Grand?: Wal-Mart, Drugs, and Antitrust (Truth on the Market)
Wal-Mart's $4 generic drug trial was initially going to just be a test in Florida, but that didn't last too long, as it's now expanded to 14 states. 14 states, seems like an odd number. Why not the whole country if they're gonna do it? Turns out, those 14 states have something in common: none of them have predatory pricing laws. So opponents can scream about predatory pricing all they want, but in those states it's not against the law. They'd have to get the law changed if they wanted something done about it. Granted, predatory pricing is a rubbish idea since it just mean aggressive competition. But, as long as some states have laws on the books, why not avoid 'em.
Cemex plans bid to acquire Rinker Group for A$17 per share (Marketwatch)
Consolidation is afoot in the cement business, as Mexican giant Cemex (not to be confused with Pemex, the Mexican oil company) announced the purchase of Australia's Rinker group. Including the cost of Rinker's debt, it's a $12.8 billion deal, as holders of Rinker ADR will get %65/share a 26% premium over yesterday's closing price. Wanna read a really cool blog about the industry, check out this from the editor of Pit & Quarry magazine.
Sun Micro posts slimmer loss; revenue rises (Reuters)
So Sun Micro is still losing money. Crazy. They sure get a lot of hype for a company that doesn't seem to be going anywhere. Whether it's because they're selling computers in a shipping container or because they have a new visionary CEO (we still miss McNeely), there's always a lot of talk out of that company. Profits, not so much. Revenue grew 17%, though that was in large part due to its acquisition of StorageTek, so ultimately the top line disappointed investors. And it reported narrower net loss, so investors can keep telling themselves that the company is on the path towards profitability.
Wendy's Third-Quarter Net Drops on Costs to Close Restaurants (Bloomberg)
Wendy's has been in trouble ever since Dave died. Remember when someone claimed to have found a finger in a bowl of Chili? That turned out to be a fairly damaging accusation; even though it was shown to be false, the company's sales suffered in its aftermath. But if Dave had been around, he would have instantly assured people in his grandfatherly voice that accuser was crazy, and nobody would've doubted it. The company continues to suffer, though we can't say for sure it has anything to do with 'the finger'. It's actually had to close US stores, as same-store sales continue to droop. Part of the turnaround plan has been the introduction of the $.99 Frescata Deli Chicken Sandwich... what in the world is that? That's scarier than a finger.
Own-Weight Elasticity (Environmental Economics)
A new study quantifies the significance of increased obesity on gasoline use. After all, a really heavy driver won't get as good gas mileage as a lighter one. Obviously, it doesn't make a huge difference, but it's not quite trivial either. So, yet another reason to hit the gym, to help wean us off foreign oil.

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