Skip to main content

Opening Bell: 6.13.07

Morgan Stanley, Deutsche Bank to Stand Trial in Parmalat Case (Bloomberg)
Apparently in Italy, as in the US, it's illegal to fail (see Enron). A judge in Milan has ordered four banks, Morgan Stanley, Deutsche Bank, UBS and Citigroup, to stand trial, in association with the bankruptcy of dairy concern Parmalat, in 2003. In what sounds like a real Enron-esque complaint, not only was Parmalat said to have overstated their earnings, but they're accused of never having earned any money at all. These four banks, apparently, were the enablers for this deception. And just for the hell of it, here's a Laroucheian take on the bankruptcy of Parmalat.
Airbus Faces Wide Gap in A350 Orders (WSJ)
We've been tracking Airbus the whole time we've been here, and the best news on the company is when there's no news at all. When there is news, it's been universally bad. The news cycle is picking up on the company once again. Yesterday, it was announced that the firm was losing a veteran executive (although we think that's probably good for them, in the long run). And now it's been revealed that the company has only taken orders for 13 of its A350 jets, compared to 600 for Boeing's equivalent. After all this time, working on wiring and stuff, that's pretty rough.
A Fate Worse than SarbOx (SpendMatters)
SarbOx sucks, but Jason Busch does a nice job of putting it into perspective. In China, corrupt executives and government officials can be sent to the firing squad for offenses, a fate that makes Jeff Skilling's sentence seem kind and not at all excessive.
Oil settles below $66 on inflation fears (Reuters)
For awhile, we were quite fond of picking apart articles such as these, which purport to know exactly why a certain market rose or fell on a given day. But then we realized that despite it being fun, it was very much like shooting fish. Still, we can't resist it today, as Reuters reports that oil fell on inflation fears. Huh? At leas the way we always heard it is that when inflation fears picked up (you know, dollars became worth less), that people parked their money into physical goods, like oil and gold. In fact, if the dollar were to continue falling, oil would have to get more expensive. But apparently, the reasoning is that people are worried that inflation will slow the economy, which will then crimp demand for oil. Aha, gotcha. And this they figured out from one day of trading.

Dell to use store-sale model to boost China PC sales - report (Forbes)
In the US, computer maker Dell is trying to revive its fortunes by focusing more on retail opportunities, as opposed to its traditional direct sales model. It might take awhile for the strategy to bear fruit, but analysts are happy that the company is at least trying. Now the company is looking to do the same in China as well. Again, the company has mainly used direct online sales in China, but you've gotta figure that there are a lot of first-time PC buyers there right now, who can't buy stuff online until they get a computer. It's a bit of a chicken-and-egg problem. So first Dell has to sell retail (at Wu-Mart perhaps?), and then maybe those customers will make repeat sales online.
FDA cracks down on body parts companies (BusinessWeek)
Seems reasonable.
Downs adds wagering platforms (The Courier-Journal)
Amazingly, in these crazy times, it's still legal to bet on horse racing over the internet. Unfortunately, you couldn't bet on the Kentucky Derby, Churchill Downs refused to provide that option (jerks). So, either you had to go to the OTB (not very pleasant), deal with a bookie (and get reamed on commission), or go to a Carney party (which was invited only, ha!). But it looks like next year, bettors will have more options, as Churchill Downs has purchased multiple account wagering platforms, which should spread the gambling fun and bring in more of that filthy lucre to Churchill Downs. Now why is this legal, and poker isn't?
Budget deficit widens in May to $67.7b (Bloomberg)
Some people (like some of us at the 'Breaker), are willing to make a spirited defense of the current accounts deficit, or at least attempt to argue that it's no big deal. On the other hand, the budget deficit has almost no defenders. There are, perhaps, some who feel like deficits don't hurt 'that much', which is a fair opinion to take. After all, the US seems to operate just fine running a deficit every year (although that's not guarantee of future results). But for the most part, everyone wants to see it shrink, which is funny because nobody can make it do so. Despite record tax receipts and Republican president (har), the deficit grew by nearly $70 billion in May. Actually, though, from the looks of it, it would appear that the deficit will be down over the whole year to do lowered spending greater revenue.
Art Market Bubble Watch (Market Movers)
Smart people will only used the b-word (bubble) sparingly, as bubbles are very rare and represent a very different environment than, say, froth. Felix Salmon is a smart guy, and so his call that the art market is at a bubble should be payed attention to. By all accounts, the market is pretty crazy. There seems to be no upward limit to how much fine art can fetch, while shares of Sotheby's (which often peak before recessions) are at all-time highs. This is not to mention the rise of all these art hedge funds. Of course, nobody know how high the whole thing will go, or whether it will be pricked. But in the absence of any fundamentals analysis, it's best just to look at trends and psychology, both of which seem to support the bubble stance. Now how do you short art?