Skip to main content

Opening Bell: 12.14.06

Sponsored by
Northwest likely to veto Continental/United merger plan - report (AFX)
You can almost add Continental/United to the list of airline mergers that could have been. Turns out that Northwest airlines owns a "golden share" in Continental, that allows it to veto any proposed mergers until the year 2025. And word is they're going to use it. Golden shares are a popular concept in Europe, as countries try to keep a small bit of control over formerly state-owned enterprises that have gone private. But you don't hear about them as much here. Did Continental even think about this, or had they totally forgotten? And seeing as how we have yet to see even one of these talked-about mergers go through, doesn't it seem a little premature to talk about how the 'wave of consolidation' will lead to higher fares in '07?
Bankers Report More Mortgages Being Paid Late or Not at All (NYT)
Naughty naughty America. You're not getting your bills paid on time. Chinese investors are getting lower rates on purchases of mortgage-backed securities, because you're spending your cash on flat-screen TVs, instead of your home. According to a survey, the rate of delinquencies for home mortgages is up to 4.7%. Not surprisingly, low-income earners and those with bad credit are the most likely to get into mortgage trouble.
Merck Wins Another Vioxx Trial (WSJ)
12 down, 27,000 to go. Can you believe it's already been a couple years since the Vioxx story broke, and we've only made it through 12 trials, most of which have been wins for Merck. With every win, the company's decision to fight the cases on an individual basis looks more brilliant, rendering the who Vioxx affair to be a regular, quarterly charge with only minimal impact on the company's bottom line. The big problem for the prosecution in most of these cases is that the plaintiffs are often alive -- no widow to speak of -- which means the case has to be argued on merits and science, as opposed to emotion.
Chinese Stocks Close at Record High (AP)
Around the world, stocks are at record highs. First, in China where the Shanghai composite index turned in its highest all-time close, gaining 1.2% for the session. Then in Europe, the Dow Jones Stoxx 600 index rose to its highest level in six years, marking the ultimate vindication for Old Europe, as much of the gains are due to a re-invigorated Germany. In the US the S&P 500 also approached a six-year high, in yesterday's session. If it hits, we might say that the move is a "confirmation", to use trader parlance. All of this supports the thesis that we're finally in the post-post-Enron era, market by the end of major criminal prosecutions, the rollback in securities regulation, and the boom times, in terms of stock market performance.

Scrushy Motion For a New Trial Denied by Judge (WSJ)
We can't help but wonder why Jesus has deserted Richard Scrushy. In his first fraud trial, the former Healthsouth CEO not only found Jesus, but even hosted his own Christian radio show, in what seemed like a blatant attempt to reach potential jurors and remind them that he was a man of the book. But then he stood another trial, and the act didn't work. And his string of bad luck continues, leading us to wonder why the whole act stopped working. A motion to have a new trial was thrown out, and now it's only a matter of when, not if, Scrushy will report to prison. Too bad for him, nobody would ever believe that he's an alcoholic, so he can't get a year taken off his sentence like Skilling.
Nestle snaps up Novartis food unit for $2.5B (Reuters)
Nestle is consolidating the global food supply, picking up Novartis nutritional food unit, which supplies food to hospitals. The two Swiss firms agreed on a price tag of $2.5 billion.
Oil jumps after OPEC sets fresh supply cut (CNNMoney)
We've noted before that oil prices always seem to be jumping or plummeting, yet always to the same price, which is just above $60. When we saw that they had surged on news of OPEC output cuts, we were sure that they had finally broken out of the range. No dice. A barrel still goes for around $62. Funny thing is, the OPEC production cuts, which are slated to take effect in February could easily have the opposite effect on the price of oil, particularly, if as we expect,t hey don't actually happen. It's easy to talk about production cuts; it's a lot harder to cut production. Now that the cartel has committed itself to this goal, it can no longer jawbone the price of oil higher. It actually has to do it. And when that fails, what bullets will they have left in the gun?
Canadian Bankers Have Bonus Envy (Dealbook)
Across the board, Canadian bankers don't get paid as much as their stateside counterparts. That goes for traders, and the guys who put deals together. We've actually covered a lot of Canadian M&A activity this year. For awhile, there was another mining deal getting cooked up almost every day. But then again, we sort of get the impression that we covered all of the Canadian deal activity this year, whereas our exhaustive coverage of the US market probably just scratched the surface, in terms of total volume.