Archive for June, 2006

• Google To Buy Googleplex
  Eddy Elfenbein, June 15th, 2006 at 7:36 am

  
  Google (GOOG) is forking over $319 million to buy the Googleplex. The previous owner was Silicon Graphics (remember them?).
  Here’s what the Googleplex looks like from 1,600 feet (via Google Earth).
  The New York Times reports that Google is building a massive double top-secret facility in The Dalles, Oregon.

  The fact that Google is behind the data center, referred to locally as Project 02, has been reported in the local press. But many officials in The Dalles, including the city attorney and the city manager, said they could not comment on the project because they signed confidentiality agreements with Google last year.
  “No one says the ‘G’ word,” said Diane Sherwood, executive director of the Port of Klickitat, Wash., directly across the river from The Dalles, who is not bound by such agreements. “It’s a little bit like He-Who-Must-Not-Be-Named in Harry Potter.”
  Local residents are at once enthusiastic and puzzled about their affluent but secretive new neighbor, a successor to the aluminum manufacturers that once came seeking the cheap power that flows from the dams holding back the powerful Columbia. The project has created hundreds of construction jobs, caused local real estate prices to jump 40 percent and is expected to create 60 to 200 permanent jobs in a town of 12,000 people when the center opens later this year.

  I won’t say that I’m worried, but it does remind me of this.

• A Funny Story Out of Japan
  Eddy Elfenbein, June 15th, 2006 at 7:12 am

  Wanna hear a funny story?
  There’s this guy in Japan named Yoshiaki Murakami. (Wait, it gets better.)
  He’s a legend in the Japanese mutual fund industry. To some people, he’s like a folk hero. The reason for his popularity is that he stands up for shareholders, and let’s just say that that’s not too “groovy” among the Japanese financial elite (it’s too…American).
  But now Murakami is in serious hot water. Apparently, he heard from some guys at an Internet company called Livedoor that they wanted to buy a company called Nippon Broadcasting. Actually, Murakami didn’t think they were serious, but he already owned lots of Nippon, and he bought even more. Well, the Livedoor guys were serious, and they went after Nippon. The fight turned ugly and Livedoor lost. But the stock soared and Murakami sold his stake to Livedoor making a huge profit.
  That’s pretty smart business, except for a minor problem—it’s against the law. Now Murakami has been arrested for insider trading. This is a HUGE deal in Japan. It would be like the Feds busting Jim Cramer on live TV.
  But now, it’s gotten even weirder. It turns out that a guy named Toshihiko Fukui invested 10 million yen with Murakami. Oh, did I mention that he’s the head of the Bank of Japan? So not only has Cramer been arrested on live TV, but he’s managing Bernanke’s money! That’s what we’re talking about. Some people are now demanding Fukui’s resignation. The Japanese market just had its biggest one-day plunge since 9/11.
  Come to think of it, the story really isn’t that funny.
  The side story is that the Japanese economy is actually doing well for the first time in years. Fukui has hinted that he might lift interest rates from their current level of 0%. He just balked at an increase, but it’s coming soon. This scandal might actually have an impact on what the BOJ does.

• The Argument Sketch
  Eddy Elfenbein, June 15th, 2006 at 6:53 am

  M: Oh look, this isn’t an argument.
  A: Yes it is.
  M: No it isn’t. It’s just contradiction.
  A: No it isn’t.
  M: It is!
  A: It is not.
  M: Look, you just contradicted me.
  A: I did not.
  M: Oh you did!!
  A: No, no, no.
  M: You did just then.
  A: Nonsense!
  M: Oh, this is futile!
  A: No it isn’t.
  M: I came here for a good argument.
  A: No you didn’t; no, you came here for an argument.
  M: An argument isn’t just contradiction.
  A: It can be.
  M: No it can’t. An argument is a connected series of statements intended to establish a proposition.
  A: No it isn’t.

  The “Argument Sketch” from Monty Python
  This is from CNBC yesterday. The video is about nine minutes long (after a brief Ford commercial). I don’t even know how to describe it. Joe Kernan is moderating an inflation “debate” between Diane Swonk of Mesirow Financial and Peter Schiff of Euro Pacific Capital.

• The Mark of the Bust
  Eddy Elfenbein, June 15th, 2006 at 6:48 am

  Martin Mayer on the fate of the dollar:

  What we have to watch out for is a sudden and drastic increase in foreign official holdings. Rapid growth in this number in the late 1960’s and 1970’s forecast the recessions of the early 1970’s and 1980’s, and it could happen again.
  Recent large increases in foreign official holdings indicate that foreign private investors see fewer attractive places to put their money in the American economy. They could presage a significant fall in the price of American assets, stocks (witness the recent drops in American stock markets) and bonds and real estate and all, and a hard landing for a world economy still floating on the crest of cheap credit.

• The Flat Yield Curve
  Eddy Elfenbein, June 14th, 2006 at 2:47 pm

  
  For all the talk about commodities, bear in mind that the most important commodity that’s traded in the markets is risk. The thing about risk is that it mysteriously floats around in different market, but it’s always there.
  Risk isn’t so easy to see in the equity market, but it’s very obvious in the yield curve. The chart above is a a good example of the effect that the stock market has on the bond market, and vice versa.
  In March and April, the long-end of the yield curve was flat. But as the risky stock sectors rallied, the yield started to curve again. Now that money is leaving risky areas of the equity markets, the yield curve is flattening again. The same thing is going on, just expressed in different languages.

• Today’s CPI Report
  Eddy Elfenbein, June 14th, 2006 at 12:21 pm

  The government reported that consumer inflation rose by 0.4% last monht, and the “core rate” rose 0.3%. This pretty much gurantees that the Fed will raise rates in two weeks.
  Over the last twelve months, the CPI has risen by 4.2% and the core rate is up 2.4%. Here’s what inflation has looked like since 1983:
  

• Gold’s Worst Day in 15 Years
  Eddy Elfenbein, June 14th, 2006 at 7:04 am

  To quote Bud Fox quoting Sun-tzu:

  If your enemy is superior, evade him. If angry, irritate him. If equally matched, fight, and if not split and reevaluate.

  This here’s the splittin’ and now we’re reevaluatin’:
  
  Sorry to run this hideous chart again, but it’s the best way to show yesterday’s breakdown in gold. The metal hasn’t dropped like this since the air war began in the First Gulf War. That time, however, the stock market soared. This time, it sank.
  Here’s a thought: Maybe Sptizer went after the wrong guys. If only he had looked in the commodity pits. Which is crazier, the Nasdaq at 5000 or gold at $730?
  Of course, you can’t frogmarch a rock, Buddy boy.

• World Wrestling Profit Falls 35%
  Eddy Elfenbein, June 13th, 2006 at 4:13 pm

  From AP:

  For the quarter ended April 30, the company reported net income of $10.6 million, or 15 cents per share, compared with profits of $16.1 million, or 23 cents per share, a year ago. Revenue declined to $114.3 million from $118.3 million in the year earlier period.
  Wall Street had forecast a profit of 13 cents per share, the average estimate of six analysts surveyed by Thomson Financial, on projected sales of $114.3 million.
  “The earnings for the quarter were just as expected, but these guys really had to fight to get there,” said Dennis McAlpine, managing director of McAlpine Associates in Scarsdale, N.Y. “They’re fighting hard for every nickel they get.”

  I blame Mark Henry

• More Goals Please
  Eddy Elfenbein, June 13th, 2006 at 1:36 pm

  I’m watching the World Cup game between France and Switzerland. It looks like it’s headed to a 0-0 tie. This will be the second 0-0 tie in this year’s tournament.
  I’m sorry, but there needs to be more scoring. I’m an America. We need action. Someone needs to be scoring, or at least inflicting pain, to keep our attention. That’s just how we are.
  In the 13 games so far, there have been just 30 goals. That’s a little over two a game, or one every 45 minutes. Teams that have scored one goal are 3-4. There’s only been one come-from-behind victory (the South Koreans 2-1 over Togo). The only game that came close to an offensive explosion was Germany’s 4-2 win over Costa Rica.
  I suggest a few rule changes (downs, set plays, use of hands, cheerleaders). Every sport in the world could benefit from more end zone celebrations.
  OK, now the Brazilians are set to play. I’m expecting them to pound Croatia. They need this win. EWZ is down 34% in a month.

• The Last Seven Months
  Eddy Elfenbein, June 13th, 2006 at 11:27 am

  
  The index bounced off 1230 this morning.