Exxon, Bear and Airlines

It's been several days since I sat down to write and my mind is racing from one story to another. Yesterday I was out sick, and it's amazing how much you fear you miss in news flow in one day. When you work in the news business, you become addicted to the news. I'm not sure I missed too much, but here are some of the random thoughts in my head. 

1. ExxonMobil: After all is said and done, yesterday the shareholders voted by a little less than 40% to split the role of Chairman and CEO at the company, not enough to make it happen. This was the second time that the shareholders lost their battle to change the role. Bad news for the Rockefellers, who led the charge, although 40% is nothing to sneeze about! What does it tell you? Tillerson is doing a good job and at the end of the day if you're a shareholder you're looking at the record profits the company is taking in. 

2. Today Bear Stearns shareholders will vote on the company’s fate. It will mark the end of an 85-year-old Wall Street firm. The first place that I worked on Wall Street. Some will be very sad, while some will cry “bailout” and once again criticize what the Fed did to coordinate Jamie Dimon's and JPMorgan's purchase -- a purchase that has the Federal Reserve of New York on the hook for up to $30 billion in assets. At the end of the day, JPM increased the bid from $2 dollars to $10 dollars and said it would retain 45% of the 14,000 employees.  

When we look back on the history of this transaction, three things will stand out. One, why did a financial institution of this magnitude go bankrupt? And how is it that one product (sub-prime mortgages) made that happen? Two, was this the moment that defined Jamie Dimon? He not only bought a Wall Street dynasty for next to nothing (now he has to turn the remains into a full-fledged successful business model) but he also made a personal pledge to call or write notes to all of his Wall Street contacts to encourage them to hire the remaining Bear Stearns employees who lost their jobs. Three, why didn't we see this coming? How could the Fed realize one week later that pumping liquidity into the markets through the Term Auction Facility could rescue other institutions, but fail to rescue Bear Stearns? Were they too late? Did Bear CEO Alan Schwartz fail to properly notify the Fed? Could he see it coming? What would change if it happened again? 

3. Once again merger speculation rears its head in the airline sector. UAL Corp's United Airlines and US Airways Group apparently plan to meet today to discuss a possible merger. It has been rumored that the two companies have been talking for months. Now, as oil sits at $130 dollars a barrel, the incentives to find solutions to the labor force (unions), financing, seating capacity and route reductions or synergies have become that more urgent. Just think about this: jet fuel in the month of May alone is up 20%. UAL and US Airways year to date are down 78% and 72%, respectively. Do they have a choice? Not likely but don't forget they've been to this dance once before in 2000, when antitrust regulators objected. After Delta agreed to buy Northwest a month ago in a stock swap now valued at $1.96 billion, the regulators may have no choice but to sign off on this and other rumored deals. If something doesn't happen soon, bankruptcies could become the bigger headline! What will Continental do now?