November 22, 2006
New York Times Response to Jenkins
Bill Keller, the Executive Editor of the New York Times, wrote a letter to the editor of the Wall Street Journal ("Misrepresented, Insulted and Belittled") complaining about a piece by Holman W. Jenkins, Jr., on the corporate structure of the New York Times. As noted here, the New York Times is controlled by a family trust that owns most all the company's Class B stock. Class B stock owners control a majority of the seats on the board. Ninety-nine percent of the shares outstanding are Class A stock (of which 85% are owned by the public; 15% owned by the family). In other words, the New York Times is controlled by a minority owner (and a very small minority owner at that). Recently the paper has been a financial disaster, with declining revenue and stock price. The answer of Mr. Keller is predictable: The family is committed to serious journalism and majority owners (which might be "hedge funds") would not be. The owners of Time magazine made the same argument in defeating a takeover bid by Paramount Communications some time ago. So according to the paper's opinion writers, shareholder power may be a good corrective for our misbehaving oil companies but it is apparently an anathema to our pristine news media companies.
November 21, 2006
Paulson Speech of United States Regulations
Treasury Secretary gave a speech yesterday outlining his views on the regulatory problems in the United States. It is worth reading in full. speech The New York Times article on the speech today reflects the policial difficulties he may have in implementing reforms. After a brief summary of his speech the article cited unnamed sources that support the higher levels of current regulation.
Monday, before the opening bell on the NYSE, firms announced multiple acquisitions, totally over $52 billion. Monday three weeks ago, firms announced $10 billion in acquisition. Two Mondays in one month -- $62 billion in proposed acquisitions. One of the deals announced yesterday is the largest private-equity buyout in history -- Blackstone's bid for Equity Office Partners for $36 billion. Stock is not cheap; market p/e means are up and in excess of historic p/e means. Moreover, the acquisitions are in multiple industries; no industry specific shock seems to explain the wave of deals. What is cheap is debt. Interest rates on corporate debt are low and bidders are using cheap debt to buy stock. It makes one wonder whether the Fed is keeping interest rates too low. A wave of acquisitions based solely on cheap debt seems an odd reason to gamble on the restructuring of the management and operations of so many firms. One would prefer that operational reasoning, increased efficiencies in the use of capital, played a larger part in the deals.
CBOT and CME Merger
The President of the Philadelphia Stock Exchange wrote an op-ed in today's Wall Street Journal that both the SEC and Dept. of Justice should read. It deals with the antitrust problems of the CME and BOT merger, the country's two largest exchanges for financial futures. His primary concern is that the futures markets have higher barriers to entry than to the equity markets (both in the trading operations and in the clearing operations) and that the market power of the new market will allow it to engage in monopolistic pricing.