Last week, Alan Greenspan spoke and spooked the market by not issuing a wholesale endorsement of the idea that inflation was under control (although he didn't reject that idea, either). This week, we found out that productivity in the last quarter rose a remarkable 4 percent, and that wage increases were tiny. Yet interest rates continued to rise, falling only (and ironically) after Robert Rubin announced his resignation. (That's what you call a coincidence.) Apparently, the bond market knows something the rest of us don't. Or perhaps bond traders are going through one of their periodic Chicken Little phases, in which they decide that everything's going to get out of control if they don't slam on the brakes. (See the Andrew Mellon quote in the last item today.) We'll find out soon enough. One of the good things about markets is that reality has a way of making you pay for wrong decisions.
Not perhaps the most hopeful thought with which to head into the weekend, but somehow bond traders never really occasion hopeful thoughts. Internet investors, now: They live and breathe hope. Criticize their valuation techniques, mock their flightiness, but do not doubt their conviction that tomorrow will be shiny, and the day after that even brighter. Every time a Net company goes public, just play the theme from Annie and it'll all make sense. And so on to the Chatter.
1. "NBC announced that it was going to merge its Internet assets with Xoom.com and Snap.com (which NBC already majority owns) in order to create a site that will compete with Yahoo, Lycos, and other Net portals. Actually, 'Internet assets' isn't exactly right, since NBC won't be including MSNBC.com or the forthcoming CNBC.com. So let's say instead that NBC will be lending its name to Xoom.com and Snap.com, in exchange for half the new company. Oh yeah. Big media is really gambling on the Internet."
2. "Chevron and Texaco, the nation's third- and fourth-largest oil companies, are in talks for a potential merger, which would come on the heels of the BP-Amoco, Exxon-Mobil, and BPAmoco-ARCO deals. Apparently, by the time the hundredth anniversary of the breakup of Standard Oil rolls around, we'll only have one global oil company again."
3. "Sony Music announced that beginning this summer it will be selling 'virtual singles' over the Internet. The songs, which will take five minutes to download, will cost the same as singles you buy in stores. Sony's new motto: 'The songs are virtual, the profits incredibly real.'"
4. "An Alabama jury ordered Whirlpool Corporation to pay $581 million to three people who had been ripped off by a door-to-door salesman peddling satellite dishes. The three people had lost about $2,000 as a result of the scam. Surprisingly, Whirlpool will be appealing the decision."
5. "Cisco reported tremendous earnings and revenue growth for yet another quarter, just as it did three months ago. Unlike three months ago, though, Cisco's shares soared on the news, apparently because the company also announced that it would be splitting its stock. The same pie, but twice as many slices: Can someone please tell me why anyone would think this makes the pie more valuable?"
6. "Barry Diller called offUSA Networks' proposed acquisition of Lycos, which would have created the first real Internet-interactive TV company, because it seemed increasingly unlikely that Lycos shareholders would approve the deal. After the deal fell through, Lycos shares were bid up, because people hope that Lycos will now get a higher takeover bid. Why they think such a bid will be forthcoming is unclear. But let's face it. The bid itself doesn't matter. Only the potential bid. In fact, in this fairytale world, what might happen is always more valuable than what does. Call it the perpetual adolescence of the day trader."
7. "Robert Rubin will be stepping down as treasury secretary, ending a tenure that earned him a reputation as the greatest treasury secretary of the century. His best-known competitor for that title was Andrew Mellon, who said at the advent of the Great Depression: 'It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.' This was, of course, in the days before compassion and tact were invented."