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Five Things You Need to Know: Fiat Roundtable, Ford's Bitter End, Adieu Baidu, On Fertile Ground, Goodbye Harriet


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. Sponsored by Fiat?

U.S. Federal Reserve Chairman Ben Bernanke, European Central Bank President Jean-Claude Trichet and more than 100 other central bankers from around the world will gather for a meeting in Switzerland this weekend.

  • The meeting at the Bank for International Settlements in Basel starts tomorrow and ends with a press conference at 12:15 p.m. on June 26.
  • On the agenda will most likely be risks of inflation plus slowing global growth, according to Bloomberg.
  • Inflation increased to 2.5 percent in the euro region last month and has now exceeded the ECB's target of a 2 percent ceiling for seven consecutive years.
  • In the U.S., consumer prices rose 4.2 percent in the past 12 months.
  • The Fed Open Market Committee will meet June 28-29 for what most expect will be a 17th consecutive 25 basis point rate hike, and growing murmurs of perhaps a 50 basis point move.
  • At least 20 central banks have increased borrowing costs in the past 60 days, Bloomberg noted.

    Official Sponsor of Central Banks Everywhere!

2. And Down the Stretch They Come!

In what is shaping up to be a battle to the bitter end... literally... Ford has now overtaken GM as the US carmaker most likely to default on its debt.

  • According to the Financial Times, the annual cost of five-year protection against a Ford default climbed to 9.39 percent earlier this week.
  • The cost of the same protection for GM stood at 9.26 percent compared to a high of 13 percent last January.
  • The cost of the protection implies a better than even money chance of bankruptcy within five years.
  • That comes despite steep cost cutting measures and the slashing of 60,000 jobs between the two companies.
  • The problem? "Legacy costs," according to GM; meaning the cost of pension obligations. (Ford meanwhile is crippled by healthcare costs.)
  • However, the Wall Street Journal this morning reported that GM, which earlier this year announced it was ending pensions for 42,000 workers, has $9 billion in cash set aside to meet pension obligations for rank-and-file workers.
  • "But what about those legacy costs," you ask? Right. That's the $1.4 billion (and growing) liability for the ballooning executive pension plan.

3. Adieu Baidu!

Google, which owned a 2.3% stake in the Chinese online search engine, has sold its stake, effectively bidding Baidu... adieu. (Go on, say it out loud a few times. It's fun!)

  • Google first purchased the stake two years ago, before Baidu's snazzy initial public offering last summer which saw the company's share price bloat from $27 to $154 by the second trading day.
  • Google sold all 749,625 Baidu shares it owned in Baidu, according to a US regulatory filing late on Thursday.
  • The sale now clears the way for the two companies to battle head-to-head in the Chinese Internet market, the Financial Times reported.
  • China has 111 million Internet users while Baidu and Google together account for 88% of the Chinese search market the FT said, with Baidu controlling 57% to Google's 33%.
  • The most frequent Chinese search topic according to Google Trends? "Paris Hilton." Just kidding. The most frequent Chinese search topics are actually, "Total Global Financial Domination and Absolute Military Superiority in the Coming Decade," and "How to Tie a Bow Tie."

"Adieu Baidu-be doo."

4. On Fertile Ground

Experts predict China's population will peak at 1.5 billion in the mid 2030s, after which the need for the American prison colony manual labor force will steadily diminish. Did I say that out loud?

  • According to a Chinese research report released yesterday, China's population will peak at 1.5 billion by 2035.
  • More than 300 scholars, including 11 academicians, spent two years compiling the report, which also involved more than 70 governmental departments and organizations, China Daily said.
  • China's population stood at 1.307 billion in late 2005, according to census figures.
  • China's labor force will grow to become the largest in history in the next 30 years, according to the report.
  • In the coming 30 years the average fertility rate will be about 1.8 children for every woman, the report said.

Scene: 2023, Somewhere in China
Setting: A Sunday afternoon at home.

What! What is it? I'm watching the game.

What?! Are you sure?

Maybe it's, like, broken.

Doesn't that one line look kinda faint to you?

No, I mean, I'm totally psyched, right? Just... surprised.

5. Snapper Requests a Moment of Silence for Harriet

Harriet the tortoise, one of the world's oldest known living creatures at age 175, has died in Australia. Senior vet Dr John Hangar told Australia's ABC that Harriet, a Giant Galapagos tortoise, died of heart failure after a short illness, the BBC reported.

"Goodbye, old friend."

Harriet the Tortoise, 1830-2006

No positions in stocks mentioned.

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