Hugh Pickens writes “The NY Times reports that Kate Stoeckle and Louisa Strauss, who graduated this year from the Trinity School in Manhattan, took on a freelance science project to check 60 samples of seafood using a simplified genetic fingerprinting technique called DNA Bar Coding to see whether the fish New Yorkers buy is what they think they’re getting, and found that one-fourth of the fish samples with identifiable DNA were mislabeled: A piece of sushi sold as the luxury treat white tuna turned out to be Mozambique tilapia, a much cheaper fish that is often raised by farming. Roe supposedly from flying fish was actually from smelt.” (More below.)

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leetrout writes “Fox News has the story on a parachute test failing on a mock up of the new Orion spacecraft. ‘This is the most complicated parachute test NASA has run since the ’60s,’ said Carol Evans, test manager for the parachute system at NASA’s Johnson Space Center in Houston. ‘We are taking a close look at what caused the set-up chutes to malfunction. A failure of set-up parachutes is actually one of the most common occurrences in this sort of test.’ Space.com has the video.”

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Filed under: Deals, Wachovia Corp (WB), Oil, Bear Stearns Cos (BSC), Housing, Recession

Minyanville Founder and CEO Todd Harrison dares to share the kind of keen insight and actionable information you won’t find in any prospectus. For more original thought, visit www.minyanville.com.

Holy cow, can it be any slower out there? I’m taking a break from trying to set the all-time record for meetings on a “slow” summah Friday to offer a swift take on a few topics.

Will Lehman Brothers Holdings Inc. (NYSE: LEH) get married over the weekend?

• There hasn’t been any price talk on Lehman so even if it happens, it’s a bit of a crap shoot. Remember Minyans, Bear Stearns was taken over too.
• There is no doubt franchise value and a lot of smart people at Lehman. There’s also a lot of baggage on their balance sheet. It — like most of the financials — is a double-edged sword.

Should the Fed step in to do something about Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE)?

• With $233 billion due by end of quarter, they have to, but there are structural and societal ramifications, which is why it’s so tricky.

• What happens to the dollar if all that debt is assumed by the government?

• Where do you draw the line of socialization? That, in a nutshell, is the moral hazard debate.

Odds and Ends

• Crude: we talked about the $10 technical increments and they continue to play out. It failed at $120 and $110 is back on the radar.

• Wachovia Corporation (NYSE: WB): you can learn a lot just by watching and this stock isn’t participating in the bank rally today.

• Retail HOLDRs (AMEX: RTH): if our take on the migrating phases of the credit crisis plays out, a nice short could be setting up as this puppy approaches par ($100).

• We’re hearing (not confirmed) that a $3 billion commodity fund halted redemptions and that could be behind the price action in commodity land this day.

We’re nearly there, my friends — keep your focus and remember that the risk profile you go home with is the one you’ll awake with during next week’s holiday thinned stretch.

R.P.

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Filed under: China, Federal Natl Mtge (FNM), Housing

It’s not clear how big the bailout of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) will be but it is becoming clearer who it is for. Yesterday, I appeared on CNBC’s Power Lunch to discuss the winners and losers from the collapse in their common and preferred equity. But today, Bloomberg News reports that one of the biggest beneficiaries of the bailout will be the government of China.

In addition to buying most of our consumer goods from China, our government could use as much as $800 billion of our tax dollars to assure that China and other holders of Fannie and Freddie assets don’t suffer any losses. Bloomberg interviews Yu Yongding, a former adviser to China’s central bank who stated, “If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic. If it isn’t the end of the world, it is the end of the current international financial system.”

That sounds like a pretty strong statement to me. I’m not sure why Yu made it or what it means. So I will throw in a mixture of fact and fiction to offer my interpretation. Bloomberg reports that China holds $376 billion worth of “long-term U.S. bureau debt [which] is mostly in Fannie and Freddie assets.” CLSA estimates that the six biggest Chinese banks hold $30 billion worth of such paper, according to Bloomberg. Those are the facts, now comes the fiction part.

If Fannie and Freddie fail, that means common shareholders are wiped out and preferred shareholders take a huge haircut. But what impact does such a failure have on the holders of mortgage-backed securities that Fannie and Freddie issued to countries like China? It seems to me that as long as the holders of the underlying mortgages keep paying and Fannie and Freddie — using our $800 billion — take up the slack for mortgage holders who default, then China and the other holders don’t get injured.

Here’s why our government has no problem using our money to bailout these holders and is happy to let common and preferred shareholders take their losses. Because if China loses money on its Fannie and Freddie holdings, it may stop buying our government debt and put its burgeoning cash reserves into other currencies — such as Euros — which have appreciated 62% relative to the dollar since January 2001. That would cause the dollar to plummet and would force the U.S. to raise the interest rates it pays on its debt.

And those higher interest rates would make the current credit crunch look like a day at the beach. With apologies to Ernest Hemingway, ask not for whom the bailout bell tolls, it tolls for Yu.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

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Filed under: Products and services, Dell (DELL)

Dell Inc. (NASDAQ: DELL) has turned on the heat within the personal server market, taking first place in server growth in the latest quarter according to Gartner. Dell’s server sales climbed 15% during the April-Jun quarter, outpacing an 11.5% gain at IBM Corp. (NYSE: IBM) and a 2.9% increase at Hewlett-Packard Corp. (NYSE: HPQ). How did Dell run so much farther ahead of HP and IBM last quarter?

Although an economic pinch in the U.S. is affecting about each industry, computer server shipments worldwide rose 12% during the latest quarter, reaching 2.34 million units and $13.8 billion in sales. Even though IBM still held onto the top spot with 31.2% market share, HP saw a small drop to 27.6% from 28.4% market share while Dell upped its market share a single percentage point to 13%. HP still delivered more server units than Dell for the quarter, however.

Does this point to a long-term trend in Dell’s server sales success? Hardly. But, the Texas company has concentrated hard in the last few quarters in consumer retail exposure and svelte laptop PC designs as well as server systems — and both efforts are making an impact. Dell’s road to gaining the foothold it once held is easily underway, but it will continue needing more overseas growth as the U.S. market withers until sometime in 2009.

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I Don’t Believe in Imaginary Property writes “Premier Election Solutions (a subsidiary of Diebold) has acknowledged a flaw that causes the systems to lose votes. It cannot be patched before the election and the machines are used in half of Ohio’s counties, but they’re issuing guidelines for avoiding the problem that presumably contain a work-around. While Diebold initially blamed anti-virus software for the glitch, they’ve now discovered that the bug was their own fault for not recording votes to memory when the cards are uploaded in ‘certain circumstances’ — something their initial analysis missed. It would be nice to hope that Ohio poll workers would be tech-savvy enough to make this a non-issue, but they had poll worker shortages last year and might need tech-savvy people to volunteer.”

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dtjohnson writes “Data from the United Kingdom Meteorological Office suggests that 2008 will be an unusually cold year due to the La Nina effect in the western Pacific ocean. Not to worry, though, as the La Nina effect has faded recently so its effect on next years temperatures will be reduced. However, another natural cycle, the Atlantic Multidecadal Oscillation, is predicted to hold global temperatures steady for the next decade before global warming takes our planet into new warmth. If these predictions are correct, there must be a lot of planetary heat being stored away somewhere … unless the heat output from the sun is decreasing rather than increasing or the heat being absorbed by the earth is decreasing due to changes in the earth’s albedo.”

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Lucas123 writes “After Iran’s first attempt to launch a satellite on Sunday fell noticeably short of the Earth’s atmosphere (though Iran claimed it made it into orbit), government officials stated they intend to put a man into space within 10 years. The long-range ballistic technology used to put satellites into space can also be used for launching weapons. Iran states it has no intention to use the technology for launching nuclear warheads.”

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stylemessiah writes “The winner of several Eureka Science Awards in Australia is a crafty chick who devised a way to create solar cells inexpensively using a pizza oven, nail polish and an inkjet printer. This was developed to address the high cost of cells and in particular for the world’s poorest regions. She wanted to give the ~2 billion people around the world who don’t have electricity the gift of light and cheap energy. This could have profound (and a good profound) implications for education and health in those in the poorest regions in the world. And it all started with her parents giving her a solar energy kit when she was 10…”

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SpuriousLogic writes “A scientist who purchased a fossilized insect on the internet auction site eBay for £20 has discovered that it belongs to a previously unknown species of aphid. The bug has been named Mindarus harringtoni after the scientist.”

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