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Wall Street Breakfast: Must-Know News

Today's "Must Know" news presents news appropriate to the moment.

1. MER got itself into a financial mess by ignoring the basics of the business cycle. The Federal Reserve Bank runs short-term interest rates on USA dollars up until they exceed long-term USA bond yields. This causes those who borrow short and lend long to loose money as the market value of long bonds falls due to higher interest rates. Once that happens, the short borrowings can not be repaid with the proceeds of long bond sales. A cash shortage results at MER. Losses on sales and on the present value on the unsold long bonds in inventory must be reported.

This situation is particularly bad in this cycle because foreign investors are pulling out of the dollar and selling their long USA bonds and short USA notes. No one wants to take their places because the USA dollar is falling against foreign currencies.

Nokia is in the same position as USA companies were in the past. As the Euro rises relative to other country currencies in which their products are sold, the financial revenues reported in Euros falls relative to costs of production also reported in Euros. And, non Euro competitors are happy to price cut against Nokia in Euro land keep their revenue in Euro and ride the currency up against thir own currency.

The cash hog situation is getting a lot of attention in US Congress lately. Why should corporate managers get big pay checks and etc for retirement packages voted to them by the board of directors they over pay and hand pick based on their willingness to channel company funds to the president that brought them on board.

Basic truth is that big cash balances are evidence that top managers is incompetent and should be fired fast. Cash should be paid to share holders so they can invest it, to buy companies with good products, and to support in house invention and product development and marketing

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