Early this morning, United Airlines (UAUA) and Continental Airlines (CAL) announced that they will join forces to create the world's largest airline in a $3 billion deal.

The new airline will be bigger than Delta Air Lines (DAL) and will send flights as far as Shanghai and South America. The companies believe that the span of destinations should attract more business travelers and their higher fares. The deal, which will need approval from shareholders and antitrust regulators, is expected to close in the fourth quarter. The new company will be known as United Continental Holdings and will be based in Chicago. The airline's largest hub will be located in Houston.

With the explosion in the exchange traded fund market, it was inevitable that we would get news that some ETFs were closing down. Following a recommendation and approval from their board of directors, Claymore filed with the SEC on Friday to close 11 of their 37 ETFs. See Zac Bissonnette's analysis of why he thinks total market index funds are the way to go.

There are two main questions skeptics have with all the ETFs on the market.

• How many U.S. large cap ETFs can there be?
• How many investors are interested in some of the minutiae ETFs that exist.

For example one of the funds that Claymore is closing is the Claymore/Clear Global Vaccine Index (AMEX: JNR). How many investors feel it necessary to have as part of their asset allocation, exposure to a global vaccine index? Have we heard investors pounding down the door asking for such an index?

I am a big believer in ETFs, and I think they will continue to grow and provide investors with a low-cost way to invest, and in many cases a more profitable way to invest as well. But as frequently happens, things go a bit too far. Look for Claymore's announcement to be the first of many as we get a bout of consolidation and closings in the ETF industry.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer has no positions in any stock mentioned as of 2/3/08

MAJOR PAPERS:

• According to people familiar with the matter, the Wall Street Journal reported that Anheuser-Busch Companies Inc (NYSE: BUD) and InBev may be one possible coupling in the fast-consolidating brewery industry; the people familiar said the two have already held talks.
• HSBC Holdings Plc (NYSE: HBC) yesterday launched its first two retail branches in Japan, according to the Financial Times. The bank also kicked off its "HSBC Premier" services, which aim to tap into Japan's budding market for wealth management.

OTHER PAPERS:

• Despite rumors that none of those interested in struggling bank Northern Rock Plc (OTC: NHRKF), the UK Guardian reported that Sir Richard Branson will submit a bid by Monday's government deadline. Investment group Olivant is also expected to submit a bid for Northern Rock.

WEB SITES:

• TechCrunch has "gotten word" that Yahoo Inc (NASDAQ: YHOO) will acquire Maven Networks for $150M.

Guitar Center (NASDAQ: GTRC) implied volatility flat as GTRC rallies on Speculation.

GTRC, a retailer of guitars, amplifiers, percussions instruments, keyboards, and pro-audio and recording equipment, is recently up $3.75 to $51.26. Chatter is circulating GTRC has hired an investment bank to explore strategic alternatives. GTRC has a market cap of $1.4 billion with long-term debt of $1 million. GTRC June option implied volatility of 33 is near its 26-week average according to Track Data, suggesting non-directional risk.

ValueClick (NASDAQ-VCLK) volatility up on expectations of continued consolidation in sector.

VCLK, an online marketing services company, is recently up 0.44 to $33.12. Investors have been speculating VCLK could be acquired due to the recent M&A deals in the sector. VCLK June option implied volatility of 61 is above its 26-week average of 41 according to Track Data, suggesting larger risks.

Option volume leaders today are: Qualcomm (NASDAQ: QCOM), Verizon (NYSE: VZ) and Wal-Mart (NYSE: WMT).

Daily Option Update is provided by Stock Options Specialist Paul Foster of theflyonthewall.com.

According to Unstrung.com, Palm Inc (NASDAQ: PALM) is said to be announcing a deal with a prospective buyer this Thursday for $20 per share. This deal will not be the last in the wireless space.

Openwave Systems (NASDAQ: OPWV) is also under intense pressure from large shareholder Harbinger Capital. In addition, SAC recently became a large shareholder.

Openwave has similar characteristics as Palm in that it has close to $500 million in cash on its balance sheet, little-to-no debt and has new product launches underway.

While there seems to be money to be made in Palm if the $20 per share offer as reported is on target, Openwave could provide even more upside.