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Five Things You Need to Know for Monday


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


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

1. Mr. T Pities the Bell Who Won't Submit

On Sunday, AT&T (T) announced plans to buy BellSouth (BLS) for $67 billion, ending months of speculation, and creating a super-size phone company.

  • The move reunites four of the baby bells spun off by Ma Bell in 1984.
  • The new company, with $120 billion in sales, about 317,000 workers and 71 million local phone customers in 22 states will have a market capitalization of as much as $170 billion.
  • AT&T will assume $22 billion in debt.
  • Verizon (VZ) remains T's chief rival.
  • Speculation on the merger began in January when the chiefs of the two companies reportedly went hunting together and no one was shot in the face with a shotgun.
  • Consumer groups already have said they will oppose the deal on the grounds it will reduce competition and raise prices.
  • The U.S. government broke up AT&T, then a monopoly, in order to create a more competitive industry.
  • AT&T's Edward Whitacre Jr. will serve as chairman and chief executive of the new company.

2. It's All About the Oil, Slick

Crude oil is trading back near $64/bbl, almost at the middle of its six-month range between 58 and 70. This week two key meetings will influence how traders perceive the short-term prospects for crude.

  • First up, the International Atomic Energy Agency (IAEA) will hold a board meeting today on Iran.
  • Iran has insisted it wants uranium enrichment only to generate electricity, not for nuclear arms, but the United States and its allies have argued that this is not the case.
  • The IAEA will today make a recommendation to the UN Security Council, which has the power to impose sanctions on Iran.
  • In a Feb. 4 meeting, the IAEA gave Iran a month to find a diplomatic solution to the nuclear standoff.
  • Meanwhile, Iran has said it could use oil as a weapon if necessary.
  • Iran is the number two oil producer in OPEC.
  • On Wednesday this week the Organization of Petroleum Exporting Countries (OPEC) meets in Vienna.
  • Most expect OPEC to hold steady its production levels, despite unrest in Nigeria and continuing instability in Iraq's production.
  • Saudi Arabia, in particular, is expected to argue against an output cut.
  • However, OPEC President Edmund Daukoru said on Friday that the global oil market is oversupplied by about 2 million barrels per day.
  • Just enough uncertainty to make the game worth watch watching, though most believe the outcome (unchanged production levels) is not in doubt.

Crude Oil, monthly
(Chart courtesy Thomson Financial)

3. Hold On, Not So Fastow

Andrew Fastow, Enron's infamous former chief financial officer, is expected to give key testimony in the fraud and conspiracy trial of two former chief executives of the failed energy giant, perhaps as early as tomorrow. While the testimony may not be market moving, it will be closely watched since Fastow has never before spoken publicly about his role in the scandal.

  • Enron, once one of the nation's most-admired companies, collapsed in late 2001 in what was then the largest-ever U.S. bankruptcy filing.
  • Fastow was the architect of off-the-books partnerships that the government contends were used to fraudulently conceal Enron debt and pump up reported profit.
  • Fastow's attorneys have said in the past that his bosses, Enron CEO Ken Lay and Jeff Skilling, both knew he arranged the off-the-book deals.
  • Under a cooperation deal with federal prosecutors, Fastow pleaded guilty to two conspiracy counts and agreed to forfeit $24 million. He also stands to serve a 10-year prison term.
  • Fastow has made no public statements since he was indicted and later cooperated in a plea deal for both himself and his wife Lea, who was sentenced to a year in prison on a tax charge.

4. India? Again?

Last week President Bush visited India, attracting widespread media attention. This week, Citigroup will hope to capitalize on the momentum, literally, by hosting a three-day conference in Mumbai.

  • Former US Treasury Secretary and Director and Chairman of the Citigroup's executive committee Robin E Rubin will deliver a key note address.
  • The Sensex has risen by about 1,200 points since the beginning of 2006.
  • Citigroup today said the return on equity of companies in India is one of the best in the world.
  • However, a Citigroup Investment Research Report on Asian equity markets said the ROE of Asian corporates are highly dependent on their exports to the United States and may take a dip if exports do.
  • Among sectors in India, the company said it was bullish on banks, consumer durables, IT enabled services, telecom and utilities.
  • The company, however, gave a bearish view on some other sectors including automobiles, commodities and pharmaceuticals.

5. Oscar Wild!

"Crash" won best picture at the 78th Academy Awards, beating out heavily favored "Brokeback Mountain." The film grossed $55 million domestically on a $6.5 million budget, compared to $78 million on a $14 million budget for "Brokeback Mountain."

  • The Academy Awards, or Oscars, began in 1928, with "Sunrise" winning Best Picture that year.
  • The official name of the "Oscar" statue is the Academy Award of Merit.
  • It weighs 8.5 pounds on a shelf, but far more heavily in the hands of a working actor negotiating compensation for future film roles.

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