Well, it looked as if we were going to get out of this week in business without any market insanity of the sort to which we’ve become accustomed. (Although if you become accustomed to it, perhaps it’s no longer insane.) But then Alan Greenspan and the Federal Reserve came along, cut the fed funds rate by 0.25 percent and the discount rate by 0.25 percent, and everyone in America decided that all was good again and that U.S. stocks were the finest investment vehicles the world has ever seen, sending the Nasdaq up 70 points and the Dow up 330 points.
It used to be that everyone believed that it took nine months to a year for Fed rate cuts to have a real impact on the economy. But if the equity markets are any indication, investors seem to believe the Fed has warded off an incipient recession with one blow. One wonders if after watching the Dow soar, Greenspan didn’t want to go on CNBC and said, “We take it back. Y’all are nuts.” (And how we would love to see Alan Greenspan say “Y’all.”)
Today notwithstanding, this was the first week in quite some time when most of the interesting news was actually business-related, rather than market-driven. And so our weekend Cocktail Chatter features items from across the spectrum. Pick and choose, as you will. This is a buffet.
1. “Amartya Sen, who studies issues like poverty and development, won this year’s Nobel Prize in economics, which last year went to the men who figured out how to price security derivatives. In light of the global economic crisis, which has thrown millions into poverty and which has been exacerbated by the use of derivatives, do you think the award was really a coincidence?”
2. “PepsiCo is focusing on an idea called ’The Power of One’ to boost sales for its Pepsi, Frito-Lay, and Tropicana brands. Apparently, people usually drink a beverage with a snack, yet often buy beverages without buying snacks (or vice versa), and Pepsi wants to change that. Presumably people usually drink beverages and eat snacks with the lights on, too. So perhaps there’s an untapped light-bulb-purchasing market that Pepsi could apply the Power of One idea to, as well.”
3. “Apple Computer reported very solid earnings in its latest quarter, albeit with a continued decline in revenue. On the company’s conference call, many analysts prefaced their remarks with compliments for Apple’s interim CEO, Steven Jobs. To them, we have only one thing to say: ‘Hey, guys! Stop sucking up! He’s never going to invite you to his house for dinner!’”
3a. “I want to like Apple, because it’s a company that’s shown a lot of heart in refusing to die. But why, when he came on stage to announce the quarterly results, did Jobs have to stand beneath a huge portrait of Cesar Chavez? Oppressed farm workers on one side, high-end computer manufacturers on the other: Is there a connection I’m just not grasping here?”
4. “Sales of Viagra in the last three months were down nearly two-thirds from the previous quarter. Apparently the decision by many HMOs not to reimburse for the pills has eroded patients’ appetite for the drug. It’s a dismaying thought, but Americans seem to be deciding that $10 is just too much to pay for an erection. Actually, maybe that’s a heartening thought. ‘Honey, I think I’ll mow the lawn instead.’”
5. “Internet firm Broadcast.com came out with its quarterly earnings (that is, quarterly losses). It lost $3.9 million on revenues of $4.5 million. Keep at it, kids. Soon, you’ll lose more than you make, and you can really watch your market cap soar.”
6. “U.S. treasuries rose on news of the Fed’s rate cut. But a weaker dollar will increase inflationary pressures, and presumably the rate cut will put some pressure on labor costs. So isn’t it possible that 30-year bonds should be less valuable today than they were yesterday? Although if you’re thinking 30 years out, I’m not really sure how to convince you of anything, anyway.”
7. “Time Warner reported excellent quarterly earnings, and chairman Gerald Levin said that it was no longer a ‘debt-laden company.’ Time Warner has $16 billion in debt. So what is it? A ‘debt-burdened company’? A ‘debt-swamped company’? Or perhaps just a ‘debt-ridden company’?”
