Skip to main content

Opening Bell: 12.19.06

Sponsored by
American Apparel to Be Sold to Investment Firm (NYT)
American Apparel CEO Dov Charney is the poster boy for compassionate capitalism. The company has become the largest-t-shirt maker in the US, with a factory in downtown Los Angeles that pays a so-called living wage to all its employees. Its clothing is fairly cheap, and its advertising is minimal, usually smartly targeted to local hipster rags. Like other retail counterparts, the company's advertising relies heavily on featuring attractive girls, but instead of airbrushed models, the girls look more like 'the really hot girl you saw at the show last night', which is a pretty smart angle. Now, shockingly, it's selling out to a small publicly traded investment firm, which means we might actually get a peek inside its financials. This is great. We'll really get to look at the nuts and bolts of the company's operations, to see how profitable it is, and to see how it manages to make clothes in the US, when so many companies have gone abroad to do it. We have to imagine that all of the various "Democrat" funds, that currently own Google, Apple and Costco, will hastily add this on to their portfolios.
Stocks tank in chaotic day, down 15% (Bangkok Post)
A couple months back, when the coup happened in Thailand, most people barely noticed, and the markets didn't seem to care. The coup-sters were capitalist coup-sters, which made everyone a lot more comfortable than if they had been some Maoist junta. But maybe it's not all cool. Stocks in Bangkok took it on the chin, after the central bank imposed strict price controls on the baht, hardly the actions of a government steeped in free market ideology. For the first time in the market's history, the "circuit breakers" kicked in, as at one point stocks were down 18%. Hey Thailand, don't worry about it. Currency controls work great in Thailand. Just be scared when Hank Paulson comes knockin'.
NYSE-Euronext Wins Crucial Support (AP)
The NYSE-Euronext merger just got a little more likely, as the proposed deal won the consent of the Dutch government, French business group Paris Europlace, and the public shareholders. It took the NYSE some time to woo these parties, in what was an impressive courting ritual that seems to have paid off. One condition that the Dutch government insisted on was that there could be no spillover of American laws onto European soil. In other words, ain't no SarbOx gonna apply to European companies. What a day it is when European governments express concern about American regulatory creep.
Ex-Fannie Mae officers sued (Chicago Tribune)
The Fannie Mae fiasco has been going on for quite a long time, but you get the impression that we're just starting to crack open the book on this one. It's like, where are the indictments? Well, we don't have any of those yet, but at least we have a lawsuit to report. The main regulator of Fannie Mae has sued ex-CEO Franklin Raines on 101 counts of fraud, and demands payment of over $200 million. Of course, because it's Fannie Mae, there's all kinds of politics involved. Attorneys for the defense insist that the plaintiff is politically biased, and is using the lawsuit as a way of urging congress to enact stronger oversight over Fannie Mae. Makes you pine for a good old shareholder suit.

LSE Offers 50% Dividend Raise in Refusing Nasdaq Bid (Bloomberg)
Just as NYSE and Euronext are getting closer to the altar, it looks like the NASDAQ is getting nowhere in its pursuit of the LSE. In a bid to curry favor with it shareholders, the board of the LSE promised to hike the dividend 50% next year. Of course, since the NASDAQ is such a big LSE shareholder, at least it's getting some cash for its efforts.
EBay Steps Back From Asia, Will Shutter China Site (WSJ)
Banking, coffee and home improvement chains are all finding ways to expand in China. Internet companies, not so much. First, Google is getting owned by rival Baidu, which at first looked like a big ball of hype when it came public, but is proving to be the real deal. Meanwhile, Yahoo has had to partner with local companies to get anything going. And now eBay is basically waiving the white flag for the second time. The first was when it dropped any listing fees for its China site, in a failed attempt at gaining market share. Now the company is shutting down its site, and taking a 49% stake in a new joint venture with established local player Tom Online.
Delta Files Restructuring Plan (WSJ)
Delta is making it clear that it sees a future for itself without US Airways. The company has filed restructuring papers indicating that it values itself between $9.4 billion and $12 billion, which just happens to be well above the offering price put forward by US Airways. Really, this one isn't gonna happen.
German Business Confidence Unexpectedly Surges (Bloomberg)
We've been closely following the resurgence of old Europe, and the fantastic economic numbers that Germany seems to be turning in day and day out. Like any period of sustained robustness, it comes down to getting the feedback loop right. Higher employment leads to more consumer spending, which leads to more investment by companies, blah blah blah. And now, business confidence is at its highest point since the German reunification. Impressively, this is in spite of an increase in the VAT that will be coming down next year.

The best investment advice you'll never get (San Francisco Magazine)
(via Information Processing)
San Francisco Magazine has an interesting article about an investing seminar held at Google days before the company's IPO. Basically, it wanted to train its scores of soon-to-be millionaires in finance, and how not to get fleeced by, well, you guys. So it brought in a bunch of financial economists, and guys like John Bogle to explain the superiority of indexing, as opposed to trying to beat the market. It seems like a one-sided event, but then again, we're not at all surprised that the Google guys are efficient markets types. Their whole business model is predicate don the wisdom of crowds.