Weekend Cocktail Chatter
Welcome to hard times. Oh, wait, that was a couple of weeks ago. This week,
we're looking for diamonds as big as the Ritz, because the Employment Cost
Index came in below expectations, which means that there's no wage pressure in
the economy, making it a good time for capital. Of course, the infinite
regression loop was in full effect today, although no one was following it
too far out. See, if the ECI was right, then that means that inflation is
pretty well under control, which helped lower interest rates and spur a lot of
buying in the stock market. But that makes most sense if the low ECI is enough
to keep the Federal Reserve from raising interest rates in November. If it's
not, even if inflation is low, the stock market could be burned. So were we
judging the ECI's impact on inflation, or on the Fed's feelings about
inflation?
I have no idea. All I know is that when I woke up this morning, switched on
CNBC, and saw the stock market was up big, I knew without being told that the
ECI was lower than expected. (That's not a sentence that four years ago I could
even have thought of, let alone imagined writing.) And so everything's good
again. Until the next big number comes out. On, then, to this week's Cocktail
Chat.
1. "The major U.S. oil companies reported earnings this week , and
although, the Wall Street Journal reported, their bottom lines were
helped by higher oil prices, they were hurt by gasoline prices, which didn't
rise as fast. I know there is a logic in there somewhere, but if you're selling
oil and gasoline, then aren't you buying from yourself? And if you're buying
from yourself, how can higher oil prices help you ?"
2. "Shares in Amazon.com were pummeled Thursday after the company
said it was going to be spending very heavily on marketing in the next quarter
and that its losses could continue to grow. A number of brokerage houses
downgraded the company to 'near-term accumulate' or 'hold', although most
retained their 'long-term buy' ratings. That's always a good one. If you're
not supposed to buy it in the short term, how can you own it for the long
term? It's like Zeno's Paradox for investing."
3. "Offering a more investor-congenial outlook for the future was
Priceline.com, which said it did better than $150 million in revenue in the
latest quarter. Of course, Priceline has the curious habit of reporting as
revenue the total value of the tickets and hotel rooms that it 'sells' on its
site , even though the vast majority of that revenue goes to the airlines
and companies supplying the seats and rooms. So Priceline's actual revenue for
the quarter was, oh, $18 million. It's a powerhouse, I tell you."
4. "The Brazilian government announced that MCI WorldCom would be
responsible for $550 million in back taxes owed by a former state-owned
telephone company that MCI WorldCom bought last year . Brazil admitted that
MCI WorldCom had been assured, in writing, that it would not be responsible for
the back taxes but said tax authorities had re-evaluated the situation. I guess
the original evaluation went something like this: 'If we lie, they buy the
company. If we tell the truth, we're stuck with it. I say we lie.' "
5. "Excite@Home spent almost $1 billion to acquire Bluemountain.com, an
Internet greeting-card company started by former hippies--does 'hippies' always
have to have 'former' attached to it? Blue Mountain has next to no revenue
(again, it was started by former hippies ), but lots of visitors. At this
rate, pretty soon you're not even going to be able to say to someone 'you
look like a billion bucks' without insulting him ."
6. "After news broke that Coca-Cola is contemplating selling its drinks
in a temperature-sensitive vending machine , which will be able to raise
prices as it gets hotter outside, a Pepsi spokesman said that Coke's plans
would 'exploit consumers who live in warm climates.' Yeah, what's up with that
whole supply-and-demand thing, anyway? Let's get a Five Year Plan on soda
pricing, please."
7. "The Employment Cost Index for the most recent quarter came in at just
0.8 percent, below expectations, easing investor concerns about possible
inflation. This is the happy situation in which we find ourselves: the less
everyone makes, the better . Well, the better for stockholders, at
least."
