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Greek Gods, Natural Gas, Browsers, and Bernanke

Jason Stipp

Jason Stipp: I'm Jason Stipp for Morningstar, and welcome to the Friday Five. This is our look back at five important headlines for investors. Here with me as always is Morningstar Markets editor Jeremy Glaser, and he's got the five. Jeremy, thanks for joining me.

Glaser: Good to be here, Jason.

Stipp: So what do we have this week?

Glaser: ExxonMobil made a big deal. Citi was not quite able to get out of the government's thumb. Greece continues to have some problems. Microsoft gets itself out of trouble, while Intel finds itself in some trouble. And finally, the Federal Reserve makes an interest rate decision.

Stipp: All right. Well, let's start with the big deal earlier this week, ExxonMobil and XTO. What do you see coming out of that?

Glaser: Yeah, it is the $41 billion gorilla in the room this week, that ExxonMobil makes this huge deal to get into the unconventional natural gas space. What they're really doing is building a platform so that they can roll up all of these other unconventional natural gas plays.

XTO has a great management team doing that. ExxonMobil has the balance sheet to support it. I think it is going to be a pretty good deal for ExxonMobil shareholders. Our analysts think the shares of ExxonMobil are pretty cheap. It just hit 5 stars. It could be a good deal for investors.

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Stipp: Also in corporate news this week, Citi having a little bit of trouble finding its way out from underneath the TARP. So what's going on there?

Glaser: Yeah, Citi announced they were going to get out of TARP and they were going to raise all this money, and they were pretty excited about it. But it turns out when they actually went to the marketplace to actually price the offering, investors were not so excited. The federal government decided to hold on to their stake and they had planned to sell a substantial portion of it. The pricing was pretty weak.

I think it shows that Citi, although they're technically getting out of TARP, is still seen as the weakest of the big banks. Wells Fargo had a similar equity offering earlier in the week that went much, much better. I think it shows where the strongest banks are and who the weakest players are.

Stipp: In international news, a little bit of a pressure point moving from Dubai, perhaps, over to the Mediterranean with Greece. What do you see on the Greek front?

Glaser: Yeah, Jason. I don't know if there is a Greek god of structural budget deficits, but if there is, I really think that a lot of the Greek government's going to be praying to him.

They continue to have issues with a really large deficit, a ton of debt. The rate agencies are getting nervous and keep bringing their debt down. It is by far the weakest member of the eurozone. It could put pressure on the euro and send people to the dollar and to other currencies.

Is it going to bring down the entire EU? No. Is there a chance that the rest of Europe is going to have to come and bail Greece out? You know, possibly. Maybe not in the short term, but it definitely is a pressure point and something that investors are going to have to keep an eye on.

Stipp: So speaking of the EU, there was some news there on the Microsoft front, good news for Microsoft. What was the deal that was happening there with their antitrust suit?

Glaser: Microsoft finally settled almost a decade-long battle with European Union regulators by creating a ballot screen. You could pick what browser you are going to use on your desktop.

Microsoft has been pursued by first the Department of Justice in the United States, then the European Union for all these competitive tactics. And now Intel is being sued by the Federal Trade Commission here in the United States for, again, anti-competitive practices.

This seems to happen again and again in the tech industry. It might just be that there are some natural monopolies that kind of form around technology companies. It could be that these got so big that they could throw their weight around. Regulators keep trying to bring them down. They never seem particularly successful, and it doesn't look like this current push to get Intel to stop bullying around the computer makers is going to make much of a difference.

Stipp: So possibly just a fact of life of doing business in this space for some of these companies.

Glaser: I think it is. Yeah.

Stipp: So the last bit of news this week, Jeremy. I think we should do a little skit so we can really illustrate for investors exactly what we think of what was going on with Ben Bernanke and the interest rate decision.

So, first we will start with before the decision, and we will give you a sense of that, and then we will show you a little bit about what happened after the decision. So before.

[crickets chirping]

Stipp: And after.

[crickets chirping]

Stipp: So the point being here, Jeremy, what exactly should we make of this decision?

Glaser: Yeah, I don't know--if anyone was even remotely surprised that the Federal Reserve held interest rates at basically zero, they may want to get their head checked out. You saw the consumer price index come out at basically zero, excluding energy and food. Inflation is not a problem. There is no way the Federal Reserve is putting the brakes on this nascent recovery anytime soon. Until inflation becomes an issue, I wouldn't expect interest rates to rise.

Stipp: Well, Jeremy, thanks for your insights on that and thanks for joining us this week.

Glaser: Any time.

Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.