Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. As I do every week, let's take a look at five dumb financial events this week that may make your head spin.
1. Stupid analyst tricks
This week's incomprehensible analyst call comes from Pali Capital's Stacey Widlitz. She downgraded shares of Best Buy (NYSE: BBY ) -- from "neutral" to "sell" -- fearing that a weak March for retail is going to eat into the stock's recent gains.
Circuit City completes its liquidation -- a superstore rival that moved $11.1 billion worth of consumer electronics in fiscal 2008 -- and she's down on the likely beneficiary? Consumer confidence is on the upswing, and she is down on the electronics niche that even bears the "consumer" name?
The call would make sense if Widlitz had a good track record in pegging Best Buy's direction, but she blew it just last month. The day before the retailer posted its results for the fourth quarter, she told clients to expect a pullback. Nope. The stock jumped 13% after a better-than-expected report the following day.
2. Don't put all of your eggs in a war-crafted basket
Shares of The9 (Nasdaq: NCTY ) were slammed this week after it was revealed that the company would be losing its exclusive license to host World of Warcraft in China. NetEase.com (Nasdaq: NTES ) will take over once The9's contract runs out in June.
This is a small victory for NetEase, because it's already a major player in online gaming in China. It's a big loss for The9. Despite the company's efforts to roll out proprietary games and license third-party content, World of Warcraft remains the key driver. It had years to use the blockbuster franchise as a tool to diversify, but hasn't done enough to prove that it can be successful without it.
3. The mill kill cult
This week's incomprehensible buyout rumor comes from Wedge Partners and TheFlyOnTheWall, who claimed to hear chatter about Microsoft (Nasdaq: MSFT ) buying China's SINA (Nasdaq: SINA ) .
This doesn't pass the sniff test on many different levels. SINA is in the process of acquiring an out-of-home advertising business that focuses on billboards, elevator posters, and monitors in high-traffic areas. Is this really Microsoft's future?
The deal also seems unlikely because the last time that Microsoft was sniffing around for even a partial stake in a leading new media company in China, regulators had fits. Who knows, in a few years the rumor may be that SINA is buying Microsoft?
4. Short people have no reason
Short interest at Sirius XM Radio (Nasdaq: SIRI ) has ballooned to 181 million shares as of the end of March, a 13% spike from the 162 million shares sold short two weeks earlier.
Of the four Nasdaq-listed companies with the greatest short interest by share volume, Sirius XM is the only one to see an increase in bearish bets since mid-March.
This is actually good news for Sirius XM, because shorts need to ultimately cover their positions. It's also the largest short position in the company since the end of January. It was shortly after that when Sirius XM bottomed out at $0.05 a share. The stock has popped eightfold since then. So the dumb nod here goes to the shorts, sadly unaware of the new short squeeze they are nurturing.
5. Run your own business, please
GameStop (NYSE: GME ) CEO Dan DeMatteo hit the CNBC airwaves, suggesting that console makers lower their prices to cope with the recession.
It may seem like an innocent comment, until you realize how self-serving it is. Hardware is a thin-margin business at GameStop. The company truly scores in game sales, scoring its thickest margins in pre-played/used sales. PS3 and Xbox 360 systems are supposedly being sold at a loss by the console companies, and GameStop wants them to take a bigger hit, so GameStop can sell more games?
If GameStop were so concerned about tightening operations in a recession, you would think that it would squeeze itself -- and narrow the wide disparity between its trade-in and resale prices -- first.
Let's beat the dumb drum:
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