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Five Things You Need to Know for Friday

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

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Five things you need to know to stay ahead of the pack on Wall Street.

1. Lou

Lucent Technologies Inc. and Alcatel SA are in advanced discussions about a $33 billion merger.

  • The merger would create a trans-Atlantic equipment supplier with a market value of $33 billion.
  • The companies were in talks to merge five years ago, but the those talks ultimately failed.
  • Lucent Technologies Chief Executive Patricia Russo would be the chief executive of the combined company.
  • With protectionist sentiment growing in both the U.S. and Europe, a merger could prove a critical test of cross-border cooperation for the French and U.S. governments, the Wall Street Journal noted this morning.
  • Lucent has a market value of $12.6 billion.
  • Alcatel's market capitalization is $20.2 billion.
  • Alcatel is the world's leading seller of DSL equipment, which U.S. phone companies have been buying to expand their broadband businesses.

Top Telecommunication equipment companies

Rank

Company Country Market value
1 Cisco Systems US $131.7bn
2 Nokia Finland $90.1bn
3 Qualcomm US $82.1bn
4 Ericsson Sweden $62.8bn
5 Motorola US $55.1bn
6 Corning US $42.6bn
7 Alcatel France $22bn
8 Research in Motion Canada $15.6bn
9 American Tower US $13bn
10 Lucent Technologies US $12.6bn

Chart: Financial Times

LU

Lou


2. S&P 5oogle

Google will join the S&P 500 on March 31, replacing Burlington Resources.

  • After what seems like an eternity, Google (GOOG) will join the S&P 500 on March 31.
  • GOOG has been a rumored addition to the S&P 500 as far back as last summer.
  • What is most odd is that GOOG will be joining the S&P 500 less than two years after its August 2004 initial public offering.
  • Amazon.com, America Online (now part of Time Warner), eBay and Yahoo each took at least three years to join the S&P 500.
  • S&P Index Committee Chairman David Blitzer said a big reason why S&P didn't add Google to its index late in 2005 is because the stock was surging – setting it up for a big decline, according to the Wall Street Journal.
  • Google is the biggest company ever added to the S&P 500, according to Nicholas Gulden, an analyst at Citigroup Inc.
  • S&P 500 fund managers will have to buy $11.1 billion of Google's stock because of its inclusion in the index, according to an estimate by Gulden.
  • John Succo noted this a.m. on the Buzz & Banter that the addition should create around $7 billion or 21,000 futures for sale over the day, or the next few days if traders decide to average out the effect.
  • Traders that arbitrage the S&P 500 index futures against stocks and index funds that hold stocks to mimic the index must rebalance by buying GOOG shares and selling S&P 500 futures dollar equivalent to account for the change.


3. New Home Sales

This morning at 10 a.m., EST, new home sales data will be released.

  • Yesterday, existing-home sales surprised to the upside as National Association of Realtors reported sales increase of 5.2%, the biggest increase in two years.
  • The jump exceeded forecasts of a drop of nearly 1% following five consecutive months of declines.
  • The unexpected rise in existing-home sales also raises doubts about consensus forecasts for today's new home sales to drop by 2.4%.
  • Although Treasuries typically do not show much reaction to new home sales data, the market's increased focus on housing data as tied to Fed policy and potential pause in rate hikes makes this release take on a bit more importance than usual.


4. Bear market's over, everybody back to work!

Whoa there, Nelly. Is the end of the bear market real? Guess it depends on what you mean by real.

  • According to Elliott Wave International's Elliott Wave Theorist, the only reason folks believe the bear market is over and that stocks are in a bull market is because the Dow's measuring unit, the dollar, has lost value by various measures since 2000.
  • According to EWT, "Ironically, one of the reasons that the dollar has been falling value is that it is a credit-based currency, and people have been borrowing dollars not only for consumption, but also to speculate in real estate and stocks. So the borrowing of dollars is pushing up prices and lowering money values at the same time!"
  • Using something "real" as a measure, such as gold, the bull market/bear market picture looks a bit different.
  • The chart below, courtesy The Elliott Wave Theorist shows the Dow/Gold relationship:


5. Finally, an at-a-glance guide to Scientology!

Chef is a scientologist. So is Jerry Maguire and Vinnie Barbarino. What do they know that we don't?

  • The Church of Scientology is a religious non-profit organization dedicated to the development of the human spirit and providing counseling and rehabilitation programs.
  • Scientology's doctrines were established by L. Ron Hubbard over a period of about 34 years, beginning in 1952 and continuing until his death in January 1986.
  • The central practice of Scientology is "auditing," which is one-on-one communication with a trained Scientology "auditor." The auditor follows a specified procedure aiomed at rehabilitating the human spirit.
  • Scientology stipulates that there are three components that make up successful "livingness": affinity (emotional responses), reality (what is real) and communication (exchange of ideas). This is known as the ARC triangle.
  • According to some, the projected cost for the "whole bridge to OT9 readiness" is estimated to be about $365,000-$400,000.



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