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Five Things You Need to Know: GDP to Lose 1% Due to "Cooling", OPEC Agrees to Meaningless Production Cut, Google Acquires "A-Rod of the Internet", In Horrible Misconception Shanghai Aims to be China's Detroit, Mr. T Urged to Quit "Jibba Jabba"


What you need to know (and what it means)!


Minyanville's Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. GDP to Lose 1% Due to "Cooling"

U.S. housing sales are declining at a greater-than-expected pace that will shave 1 percentage point off economic growth in the second half of 2006, Freddie Mac said, according to Bloomberg.

  • "The weakness in housing is slashing economic growth," Freddie Mac Chief Economist Frank Nothaft said in an interview with Bloomberg.
  • Housing sales probably will continue to tumble until the first half of 2008 and result in a 27% cumulative drop, said Richard DeKaser, chief economist at National City Corp. in Cleveland.
  • That would surpass the 25% decline seen in the 1986-to-1991 housing slump, he said.
  • Meanwhile, it was just last week in a speech to the Economic Club of Washington that Federal Reserve Chairman Ben Bernanke admitted that housing would lop about a percentage point off of GDP.
  • Merrill's David Rosenberg yesterday noted that since February Chairman Bernanke has discussed the housing market in terms that have slowly evolved from "a modest softening" to "some cooling" to an "orderly" downturn to last week's "substantial correction."
  • Although it appears the Fed Chairman is "adjusting" his housing view as data comes in, we predict he will likely stop short of characterizing the housing downturn as a "likely to send ordinary families scurrying to fill underground bunkers with canned goods and household gold and silver."

    Household fallout shelter - circa 1950s

2. OPEC Agrees to Meaningless Production Cut

The president of the Organization of Petroleum Exporting Countries (OPEC) said the group has agreed to cut global crude production by 1 million barrels a day, according to the Associated Press.

  • OPEC's output quota now is at 28 million barrels a day.
  • It's daily production is at roughly 30 million barrels per day.
  • Meanwhile, even as OPEC has ostensibly agreed to the production cut, the International Energy Agency forecast that demand for oil would not rise substantially in the first half of 2007.
  • The IEA forecast the market for OPEC crude for the first quarter of next year at 29.5 million barrels a day and for the next at 29 million barrels.
  • The last time OPEC trimmed its output - by 1 million barrels a day - was December 2004 when oil traded slightly above US$40 a barrel.
  • Meanwhile, we keep coming back to the reality of the situation as presented by OPEC back in July:

  • OPEC is "powerless" to stop the market from surging, but has no problem propping up prices?
  • This time, we suppose, is different.

3. Google Acquires "A-Rod of the Internet" for $1.65 Billion

It's taken us a couple of days to digest the Google-YouTube story, which at its core is a mish-mash tale of dreams, misspent youth and a get-bankrupt quick scheme that ultimately the courts will pass judgment on... or is it?

  • It's become "cool" to call Google "morons" for buying the Internet video-sharing site YouTube for $1.6 billion.
  • In fact, I haven't found a single person who likes the deal.
  • Mark Cuban calls the purchase "crazy" and "moronic." But is it really?
  • Clearly there are hurdles. Some of the videos Google now sells from producers such as Sony are available as free downloads on YouTube.
  • No one is quite certain how this will impact Digital Rights Management and content ownership.
  • One thing that is for certain, as Barry Ritholtz pointed out earlier this week, is that Google, with a float of 215 million shares, and a significant stock boost since floating the rumor last week, basically bought YouTube for free.
  • Trying to put ourselves in Google's shoes for a moment - let's call them the New York Yankees of information aggregation on the Internet - they likely saw a content aggregation site with a similar look and feel showing more than 100 million video clips per day to a growing audience of potential advertising targets.
  • The worst case for Google was that YouTube becomes a marquee player on the Internet acquired by a key competitor such as Microsoft or Yahoo, and delivers a championship ring to one of those older franchises.
  • The best case is YouTube's content sharing platform avoids legal pitfalls and leverages Google's information aggregation into a deeper, more diverse space.
  • The most likely case is Google just acquired the Internet's equivalent of Alex Rodriguez... a defensive move that, while the gripers complain did not result in a Yankees championship, at least prevented a competitor from acquiring a potential franchise player.

4. In Horrible Misconception, Shanghai Says it Aims to Become China's Detroit

Shanghai's municipal government, clearly unaware of the reality of the modern American "automotive city," announced plans to turn Shanghai into "China's Detroit."

  • The Shanghai Daily reported that the municipal government has set the goal of turning Auto City, in the Anting area of the city's western district of Jiading, into a multi-functional regional hub equivalent to Detroit, Michigan with an additional investment of 38 billion yuan (US$4.75 billion) and bolstering its research and development capacity, the Asia Times reported.
  • Analysts say Shanghai has a competitive edge over rival Chinese cities in automobile manufacturing.
  • Meanwhile, China's central government has identified the auto industry as a "pillar" of the nation's economy and offers incentives and protections to domestic producers, much like Detroit auto manufacturers received in the 1970s and early 80s.
  • By the end of this year, China is expected to become the world's third-largest car maker, following the US and Japan, according to a report released by Polk Marketing Systems.
  • If the plan to turn Shanghai into Detroit succeeds, the city will eventually become one of China's most dangerous cities, typically in the top five among cities with the most violent crimes each year, with a median household income about 20% below the national median income level and per capita income 20% below the national average and an unemployment rate nearly twice the national average of 4.6%.

    Detroit, Michigan

5. Mr. T Urged to Quit "Jibba Jabba"

Following the debut last night of Mr. T's new TV Land show, "I Pity the Fool," reviewers across the country urged the former gold-laden A-Team star to stop his "jibba jabba."

  • Mr. T's new show is a reality-based "motivational mission" show based on his popular catchphrase from the 1980s A-Team series, "I pity the fool."
  • Washington Post reviewer John Maynard notes, "We won't quite say we pity the fool who watches this show, but we warn potential viewers by quoting Mr. T himself: "You betta watch out, sucka."
  • Reuters says "Mr. T Merely Pitiful in New TV Show."
  • The South Florida claims, "The first few episodes suggest a better title might be "I Pity the Viewers.""
  • The more important question is how this show affects the Minyanville proprietary Mr. T Gold Indicator.
  • It's an interesting question because Mr. T's gold is conspicuously absent in his new show, an absence the A-Team star attributes to his first-hand witnessing of the devastation caused by Hurricane Katrina.
  • Below is the updated Mr. T Gold Indicator.

    Mr. T Gold Indicator Key
    1. 1981 - With gold at all-time high, Mr. T lands role in Major Blockbuster, Rocky III.
    2. 1982 - Gold rebounds from sharp selloff, but peaks as Mr. T lands role in hit TV series The A-Team.
    3. 1987 - The A-Team is canceled, its final episode airing in March 1987... a final farewell for Mr. T?
    4. 1996 - Mr. T returns to star in comedy cult classic "Spy Hard," as "Helicopter Pilot."
    5. 2006 - Mr. T returns to television as star of reality show "I Pity the Fool." Series roundly panned by critics suggesting appetite for society's symbols of gold has peaked.

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