Weekend Cocktail Chatter

Is it OK to stop saying: “Big week in the markets”? But it was. Spurred, oddly enough, by a Fed rate hike–it used to be programmatic that stock prices fell when the Fed raised rates–the Dow reached 11,000 for the first time in months and the Nasdaq set new record after new record. Price-to-earnings ratios are fairly meaningless statistics–since they don’t take into account how much capital companies are using to get their earnings–but if we can use a meaningless stat, the market’s current P/E ratio puts all those that came before it to shame. Or, alternatively, the market’s current P/E ratio makes all those that came before it look sane. (Those two sentences sound so much alike, and yet mean such different things.) Of course, the fact that the United States and China reached a deal on a wide-ranging trade agreement is a nice symbolic statement of part of the reason why U.S. stocks are so much more valuable today than they were a decade ago. The world, at least in the economic sense, is just a much bigger and more profitable place. Which doesn’t mean you need to eat, drink, and be merry tonight. But at the very least, Chat.

1. “The United States and China reached a landmark trade agreement. As part of the deal, China agreed to import up to 40 American films a year, up from 10 a year now. An unwritten side deal ensured that neither Message in a Bottle nor Random Hearts would be included in the list.”

2. “Gucci announced that it won a quiet bidding war for luxury retailer Yves Saint Laurent. Soon there will be only four major fashion companies in the world–Gucci, LVMH, Prada, and Armani–and they’ll still be competing for the exact same tiny group of customers.”

3. “Standard & Poor’s said Pakistan had effectively defaulted on its bonds when it asked current investors to swap their old bonds for new ones. The world’s markets returned a unanimous verdict of ’Who cares?’ Presidential candidate George W. Bush would have had a comment, but he decided to wait until he figured out exactly where Pakistan was, and what ‘a bond’ meant.”

3a. “Standard & Poor’s also announced that it was downgrading National City Corp. from a ‘hold’ to an ’avoid.’ Next for the stock: ‘avoid at all costs.’”

4. “Kurt Kinzius, the executive of German phone company Mannesmann who earlier this week testified that he was at a meeting where a Goldman Sachs banker told Mannesmann’s chairman that Goldman would not help Vodafone launch a hostile bid for Mannesmann, filed a new affidavit saying that he hadn’t been at the meeting. ‘I have now had an opportunity to refresh my memory,’ Kinzius said. ‘I was lying the first time,’ Kinzius did not add.”

5. “Hewlett-Packard spinoff Agilent went public on Thursday and watched its stock price jump better than 50 percent. Surprisingly, Agilent, although a high-tech company, is profitable and has been profitable for quite some time, and yet investors flocked to it. A breath of sanity arrives.”

6. “Rite-Aid, whose stock price has been crushed in recent months because of concerns about accounting irregularities, announced Thursday that long-time auditor KPMG had resigned as its accountants because it could not rely on Rite-Aid’s management to provide accurate numbers. Let’s face it. Here’s where Rite-Aid’s corporate communications and investor relations people get a chance to earn their salaries. ‘KPMG left because of: Personality conflict? Health reasons? Utter disgust? … No, cancel that last one.’”

7. “Boring headline of the week: ‘Corning said it agreed to acquire Oak Industries in a stock transaction valued at about $1.8 billion.’ The really sad thing is that I’m sure Oak Industries’ revenue is close to the price of the transaction. If it were a Net company, it’d be, oh, 30 or 40 times less.”