Skip to main content

Opening Bell: 8.15.07

Sponsored by

Nestle posts 18% net rise, launches $21 bln buyback (MarketWatch)
No matter what happens in the economy, people gotta eat, and Nestle, the world's largest food company, is perfectly suited to take advantage of that "trend". The company's shares jumped after it reported an 18% rise in net profits and a whopping $21 billion share buyback. It seems that no matter what market conditions are or where a stock is, investors are still enamored with the buyback.
With Tech Firm's IPO, a Valley Giant is Born
It's pretty odd to think how few people knew who VMWare was just a few weeks ago. Despite being involved in virtualization technology, few would likely have argued that this was a particularly sexy sounding area. And now, just like that, VMWare is the third-largest, homegrown (Silicon Valley) software company there is after Oracle and Adobe. The real winner is storage firm EMC, which retains a majority stake in the company. It bought VMWare out just a few years ago for a sliver of its current value. Well done. Yesterday we wondered whether market turbulence would have any effect on the offering, but it seems clear that investors aren't (yet) throwing the baby out with the bathwater.
Oil prices steady above $72 (Reuters)
Oil prices remain hovered around $72/barrel although the sentiment seems to be biased towards the downside. As this article puts it, even a storm in the Gulf of Mexico isn't enough to push prices higher in the face of broader economic worries. That seems pretty reasonable -- global economic collapse/storm, storm/global economic collapse, global economic collapse/storm. Yeah, global economic collapse would probably be our main concern if we were trading as well.
FTC filing tells of 30 Wild Oats closings (Rockey Mountain News)
The Whole Foods/Wild Oats deal has proven itself to be a fiasco shrouded in disaster wrapped in an absurdist farce. First, there was the nonsensical FTC intervention, followed up by word that CEO John Mackey bragged about how the deal would make the market less competitive. Then there was the whole message board affair, which needs no reminder. And now the FTC has "accidentally" (we have our doubts) let slip information on how many Wild Oats stores Whole Foods plans to close should the deal go through. Apparently that part of the document with this information was supposed to be blacked out, but as numerous companies have learned, it's really easy to mess up blacking out part of a document.

Click Here

Las Vegas, Detroit foreclosure rates double-report (Reuters)
The housing slump, it would seem, doesn't discriminate based on geography. Foreclosure rates in both Detroit and Las Vegas have doubled from the year-ago period, making them the highest score among metropolitan areas. To be honest, we think it's awfully charitable to call Detroit a metropolitan area. It's population has dwindled to next to nothing and it doesn't even have a supermarket.
Europe’s Bank Says Financial Turmoil Largely Over (NYT)
It was a long, stormy night. We spent several hours standing on the ship deck, puking our guts out from seasickness, but she held up mightily. And now the sun is upon is -- the storm a distant memory off the horizon. At least according to the ECB, which says that the financial turmoil is over. We suppose it's possible that the ECB is taking a rather narrow interpretation of 'turmoil', but maybe they're not -- maybe it's just time to move on.
Time to Double Down? (Mahalanobis)
Does it make sense to double down on the hedge funds that have suffered enormous losses this year. A few investors seem to think so, as many of the majors have announced fresh investments. There's probably no easy answer, just as it's not easy to make the decision to make the first investment. On the one hand, there's the reversion to the mean, although as Eric Falkenstein points out, reversion to the mean is usually a phenomenon that happens in retrospect rather than something obvious at the time. The opposite is that the fact that they've lost money does not reflect well on their strategies. It may not reflect bad -- it could be a fluke -- but it should raise some doubts about their sustainability. Just something to mull over.
Goldman Fund Cuts Fees to Woo Investors After Loss (Bloomberg)
In a bid to raise money for its Global Equity Opportunities fund, Goldman Sachs has made the extraordinary announcement that it intends to slash its fees. 2 and 20? Nah, try 0 and 10. Seriously. Is this the start of a price war in hedge fund fees, as recently bloodied funds desperately slash fees in order to raise capital? On the other hand, doesn't slashing fees smack of desperation. Do people really want their money managed by the $.99 store?
Regional Indexes Fall Sharply Amid U.S. Credit Worries (WSJ)
After yesterday's fall in the US, Asian markets got slizammed in overnight trading, sending the indexes to multi-month lows. The hardest hit was Indonesia, whose market lost over 6%, followed closely by the Philippines, with losses of 4.08%.
Mattel’s CEO Should Think Before Answering (Venture Chronicle)
In light of massive toy recalls, Mattel CEO Bob Ecker has come out swinging, arguing that the company has the best safety standards in the business. As Jeff Nolan points out, that's pathetic. If having the best safety standards in the business still leads to those recalls, somethings wrong, either with the company or the industry in general.