Daily FX
Euro: More Reasons to Hit 1.50
Tuesday October 30, 5:38 pm ET
By Kathy Lien, Chief Strategist strategist@dailyfx.com


Interest rates are not the only reason why the EUR/USD continues to rise. German economic data continues to surprise to the upside with the number of unemployed people dropping by a more than expected 40k in the month of October. This brought the country's unemployment rate down from 8.8 to 8.7 percent, the lowest since 1993.

The Financial Times has extensive coverage today on why German corporations have been able to weather the strain of Euro strength far better than their French and Italian counterparts. According to the articles, more diversification of sales internationally, increased production in local markets and strong domestic demand has the made the country less sensitive to Euro strength. Even the automobile industry which has been extremely hard hit by the strength of the Euro over the past few years (Volkswagen lost EUR1 billion due to currency fluctuations) is shifting production to the US where costs and profits will be less sensitive to currency fluctuations. ECB officials continue to be worried about inflation. Consumer prices are due for release tomorrow; they are expected to remain above the ECB's 2 percent target for the remainder of the year, keeping the central bank hawkish and the Euro on its way to testing 1.50.

NEW YORK (AP) -- The unfolding credit crisis has claimed its biggest corporate casualty so far: Merrill Lynch CEO Stan O'Neal.

The announcement of his departure Tuesday came after the world's largest brokerage posted a $2.24 billion quarterly loss, its biggest since being founded 93 years ago. Merrill Lynch did not name a replacement for O'Neal, whose ouster had been expected, and who leaves the company with benefits worth $161.5 million.

Laurence Fink, the chief executive of investment manager BlackRock Inc., turned down an initial overture from Merrill's board but is in active negotiations, according to a person with direct knowledge of the offer who was not authorized to speak publicly. With the presumed front-runner out of contention, filling the top spot at Merrill Lynch is not expected to be easy given the remaining unknowns from the global credit crisis.

Any replacement will face the daunting task of cleaning up investments in subprime mortgages and other

If you want to make money investing, one of the most important rules is to avoid following the herd when the numbers don't support the hype.

One sign a "herd" mentality has taken over investors is when people proclaim that old, tested investing models no longer apply and use generalities to describe what's going on in the market instead of relying on hard data.

Excessive interest in sometimes risky investments due to insecurity that one might miss out on a hot stock or fund is one of the key ingredients in investment bubbles, according to a July 2006 study by Peter DeMarzo and Ilan Kremer of the Stanford Graduate School of Business, along with Ron Kaniel of Duke University's Fuqua School of Business.

If you have ever wondered why people continue to invest even when it becomes obvious that a stock or fund is risky and a bubble is forming, the study finds that it isn't so much that people believe that they are buying into a good investment, but simply that they are afraid that others will make money on the

OVERLAND PARK, Kan. (AP) -- Shareholders of the bar-and-grill chain Applebee's International Inc. on Tuesday approved a $1.9 billion buyout offer from pancake house operator IHOP Corp.

More than 70 percent of the company's shares voted to approve the agreement, which critics said shortchanged shareholders.

Under terms of the deal, shareholders of Overland Park-based Applebee's will be paid $25.50 per share, a 4.6 percent premium over its closing price on the day before the offer was announced.

Glendale, Calif.-based IHOP is also assuming $155 million in Applebee's debt as part of the deal.

The sale is expected to close by Nov. 29. The combined company would have $6.8 billion in annual sales

SINGAPORE (AP) -- Oil prices dropped Tuesday from a fresh record set on the view that the disruption of one-fifth of the oil production by Mexico's state oil company is only temporary.

Light, sweet crude for December delivery fell 75 cents to $92.78 a barrel in Asian electronic trading on the New York Mercantile Exchange, midmorning in Singapore.

The contract rose $1.67 to settle at a record $93.53 a barrel Monday, after rising as high as $93.80, a trading record.

The surge was largely driven by news that Mexico's Petroleos Mexicanos, or Pemex, was to temporarily halt as much as 600,000 barrels of daily crude production, due to stormy weather.

But concern over the disruption of supply from Mexico was easing, analysts said.

"It looks like the production will resume in a matter of days, so it's only a temporary disruption," said Victor