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The Big One?DealBroken: A Week In Review

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[Editor's Note: We're going to be rolling out a new set of features in the next couple of weeks. The first one, DealBroken: A Week In Review, will look back on Monday morning at the top stories from last week. It's a way of playing catch-up if you spent last week at the beach or, more likely, locked in a conference rooms while a deal was put together.]
The Five Percent Solution. Stock market indexes hit record highs in the beginning of the week and then found themselves subject to a sharp sell-off Tuesday through Thursday. Friday saw a rally, as each of the last twelve Fridays. Most credited higher interest rates, inflation fears and a troubled housing market for the sell-off. The ten year bond yield bond rate reach 5.25%, the highest since 2005. Youngsters found the rate shocking, and noted that in the last four years the stock indexes remained flat whenever the 20 year yield went above 4.75%. Those who have been around for a bit scoffed at the idea that five and a quarter is "high" for a ten year rate. (Really old timers noted that this might be the end of a 22 year decline in interest rates. No-one seemed to have a memory long enough to recall what might come at the end of a long-term credit expansion. Both Murray Rothbard and Milton Friedman were unavailable for comment).
Hope of a Fed rate cut this year rescuing the stock markets became an endangered animal. Goldman Sachs canceled it's forecast for a rate cut. Pimco's BIll Gross said 10 year rates might be headed as high as 6.25%. In the fever swamps of Cramerica, however, the hope continues to survive.
Family Values. Bancroft family members met for the first time with Rupert Murdoch to discuss a possible sale of Dow Jones & Company. Both sides described the meeting as "constructive" although the only thing that seems to have been built during the meeting was an agreement to describe the meeting as "constructive." Two other wealthy men indicated they might be interest in making an offer for the company.
Alien Nation.The senate voted against a bill to reform immigration laws, unleashing howls of protest from the bill's supporters. Despite widespread media coverage of the bill, only half the public say they are paying attention to the debate while half of those those who are paying attention still say they don't know enough to to say whether they support the bill. (Those who think they do know enough oppose the bill 38% to 11%.) What could be confusing the public or causing it to ignore the debate? Aren't the issues perfectly clear?
Arizona governor Janet Napolitano blamed the manipulative tactics of opponents. "Opponents of the Senate immigration bill--those who really want to do nothing--merely yelled 'amnesty' in place of reasoned opposition. They were--and are--just plain wrong," she wrote in the Washington Post. Unfortunately, supporters of the bill were also calling it amnesty, confusing matters even more. "There will be amnesty for most of the undocumented aliens in our midst, even though we have to dress it up and lie about its name," Thomas Donlan wrote in Barron's. If the supporters cannot keep their lies straight, no wonder the public is confused. Seventy percent of the public says it wants to reduce immigration but no one is even bold enough to even pretend the immigration bill would do that. Better, apparently, to do nothing than bow to the will of the people.

Bits and Pieces.
Kobi Alexander's long awaited extradition trial began. Amaranth told a court that hedge funds are risky investments. Bear Stearns was accused of manipulating the credit default swap market by doing evil things like bailing out troubled home loan mortgage holders. The IRS shut down a tax dodge after IBM admitted using it. Kirk Kerkorian turned 90. Prudential shut down its equity business. Blackstone abandoned plans to adopt fair-value accounting.



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