Opening Bell: 5.9.08

Publish date:

Citigroup considers $400bn asset sale (FT)
Citigroup plans to sell 1/5th of its assets, or $400bn worth of goods, as part of a major cost cutting initiative, according to FT. Evidently, the company feels it has "legacy" lines that need to be flensed. We love the use of the word legacy to basically rationalize any flailing operations. Something not doing well? Oh, it's a legacy business, might as well strip it out of your models. All that being said, don't expect CEO Vikram Pandit to announce a breakup of the business --- just a $400 billion sale, that's all.
Questions of Rent Tactics by Private Equity (NYT)
Sort of a classic NYT business section article here... Apparently, private equity firms that have bought into NYT housing developments have a business model that depends on a high degree of renter turnover -- i.e. folks in rent-controlled units leaving at a higher rate than in other buildings. And so tenants are claiming that renters of rent-controlled units are subject to various harrassment and whatnot. You can judge for yourself the situation, however this has to be one of the best/worst paragraphs we've seen in the paper: "Private investment funds have boomed in recent years, buying companies they considered undervalued in industries as diverse as communications, hotels and energy, streamlining operations and then selling them at a profit. For example, private equity firms have bought nursing homes, often slashing expenses and reducing staff to increase their profit." Really good example there.
Would making insider trading restrictions optional for corporations suffice? (Knowledge Problem)
This is a debate we've always enjoyed: why can't companies just say: "We allow our employees to trade on inside information, caveat emptor." Given the arbitrariness of current insider trading laws (you rarely, for example, see anyone hauled in for not selling shares based on inside info), this always seemed like it would work. The above post offers some interesting points to think on.
The 18-Cent Solution (NYT)
McCain and Hillary have been looking for an economist to support them on their plan to eliminate the federal gas tax. We've been figuring that one would eventually, you know, just to get some exposure, but for a long time, nobody did. Finally, Bryan Caplan (most known for his recent work "The Myth Of The Rational Voter") has done it, penning an op-ed in the NYT in support of the measure. It's tepid as hell, and it basically comes down to this: it's not the worst thing you could do. In other words, politicians have that urge just to do something, and usually that something is fairly awful. It wouldn't be hard for you to come up with a list of ten awful ways politicians might try to solve the gas problem. But, as Caplan explains: cutting gas taxes isn't really so awful, and if it precluded other measures, it wouldn't be so bad. Now let's see Hillary run to trot this guy out -- of course, making no mention of his recent book.

Comedy Central, Attell bang 'Gong' (Variety)
One of our biggest regrets is that we weren't around for the first Gong Show. So you can imagine our relief that it's evidently coming back.
The World's Best Chinese Food (WSJ)
It's in the Wall Street Journal, and it's Friday, so we're taking liberties... if you happen to know anything about the Opening Bell, you know that Chinese Food is one of the few loves in our lives, which is why this article talking about stuff like "purple lily roots with pumpkin", a dish you may find a Chinese restaurant in Beijing is totally awesome. Any readers of The 'Breaker going to Beijing for the Olympics this year? If so, check some of this stuff out (or other stuff) and take some pictures.
Merck Bails on Natural Products (In The Pipeline)
An interesting insider-ey (a word we've been seeing a lot lately) take on a move from Merck to dump its "natural products" business. Apparently the company had a small unit in Madrid for the last 50 years working on stuff, and, not surprisingly, it hasn't really gone anywhere. So after 50 years, seems like it's time to give it a rest.