Opening Bell: 10.31.06

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A Proposal for Federal Protection From Catastrophe Divides Insurers (NYT)
Watch out General Re and your Cayman Islands-based cohort, the federal government is increasingly getting into the re-insurance game. In a bid to protect themselves against catastrophic losses, many retail insurers are asking the government to guarantee aid in the event of major losses. This is flat out ridiculous. For one thing, the whole point of buying insurance is to insure against catastrophes, and the one risk in writing insurance isin too many catastrophes, or really large ones. Trying to take out the catastrophes pretty much negates the whole point of insurance. This is why we have reinsurance, so that insurers can by policies to protect them. Fortunately, not all insurers have their heads screwed on backwards. Some are noting that federal guarantees would have the effect of lowering premiums in disaster-prone areas (Hello FEMA), which will only lead to more enormous disaster and payouts. Bingo.
Kodak Posts Eighth Loss on Costs to Eliminate Jobs (Bloomberg)
Just to be clear, Kodak is still struggling to deal with the explosion of digital cameras. We've been hearing for years now about the aggressive restructuring going on at the world's largest photography company, and how it would leverage its brand into becoming an important player in digital photography. It was even on the cover of Barron's back in 2004, touting it as a turnaround play. Well, the company is still reporting quarterly losses, eight in a row now, and it lowered its outlook for next year. So any comeback looks like it'll have to wait awhile.
Morgan Stanley May Double Down on Hedge Funds (Dealbook)
It's always trouble when you start doubling down. You think to yourself, "Ok, I just had a string of bad natural gas trades, but if I double down, then eve one moderate win will make up for it". And then that fails, and then you double down again, looking for a big win, and so on, until you're busted. In the broader picture, it hasn't been a great year for hedge funds; many of the outsize returns we're used to seeing just haven't materialized. Nevertheless, Morgan Stanley is "doubling down" on the funds, taking stakes in them on a daily basis. The firm is close to buying hedge fund FrontPoint partners, which comes on the heels of taking a stake in Avenue Capital Group, which specializes in distressed debt. Eventually, one of these bets will come up big.
UBS profit drops; trading income falters (Marketwatch)
It's the season of discontent for any bank that has Suisse in their name. First, Credit Suisse may go skimpy on the bonuses this year due to big trading losses, and now UBS turns it some pretty weak numbers, again on trading losses. The company turned in earnings that were down 21%; the big culprit seems to have been a wrong bet on interest rates. It's instances like these which really make some of these banks look like hedge funds. One mistaken bet on interest rates led to a 21% decline? That's pretty crazy.


U.S. Justice Dept. Probing Sony Unit (AP)
You have to really feel for Sony these days. What more could go wrong for them? It's taken a major financial hit due to some combustive batteries. There's doubts about the success of the Playstation 3, considering how big of a head start the XBOX 360 has had, and now the DOJ is investigating the company on anti-trust issues over, what else, chips... in this case SRAM. There's a long history of DRAM investigations, typically looking into Korean makers. But now that that's winding down, the Chip Investigation Unit has to do something.
Top 10: Most affordable college football towns (CNNMoney)
Honestly, this is to be the most contrived, silliest list we've ever seen. Most affordable college football towns? What the hell? Number one spot goes to Tulsa, OK. Number 3 goes to Muncie Indiana, home of Ball State.
Wal-Mart jumps the gun on Black Friday? (CNNMoney)
We suppose it's never too early to talk about the Christmas shopping season. After all, supposedly it's the make or break time for most retailers, and with Wal-Mart turning in light numbers yesterday, suddenly all of the attention goes to it. Already, some of Wal-Mart's big "Black Friday" deals are being leaked. One website -- which bills itself as the official website of Black Friday -- claims that the store will offer a $389 laptop. Too bad it's a Compaq Presario, which dates it about 5 years ago. At that price, you're pretty much just paying for Windows with the computer thrown in for free. Last year when it offered a similarly priced HP Pavilion, demand was so hot it led to in-store fights. It just goes to show that if you price something below equilibrium, you still pay. Remember the same thing happened when a school district thought it was being nice by selling its Apple laptops to the public on the ultra-cheap.
KFC pledges to cut trans fat (Lexington Herald-Leader)
As New York City continues the process of banning trans-fat laden oils, KFC went ahead and cut 'em out. And it claims that none of its customers noticed. Yeah yeah yeah, this is just annoying. By preemptively cutting them out and then making a big deal about how nobody noticed, the company's just rubber-stamped the New York Plan. Now McDonald's and Burger King (which says it has a test coming up in the next 90 days) will follow suit, and then the ban will be in place. Still, the most obnoxious thing we've ever seen was a guy wearing a t-shirt that said "Don't Partially Hydrogenate Me, Ban Transfats Now!"
Merck Purchase of Sirna Boosts Efforts in Gene-Silencing Field (WSJ)
Merck will spend over $1.1 billion to buy San Francisco-based Sirna Therapeutics, a biotech that specializes in RNA interference. RNA interference is a science based around disrupting specific genes that could possibly lead to diseases. It could also allow for the creation of new super-targeted medicine, such as cancer medicine that won't harm non-cancer cells. At $1.1 billion it's a pretty huge vote of confidence in the technology, since Sirna doesn't have any products on the market, just a handful of drugs in development.

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