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. Bad to the Baidu
Shares of Baidu
As China's leading search engine, Baidu certainly has plenty to gain by shaking out its distant rival. However, is a $77.74-per-share move warranted? After all, what would it truly be telling the world if the Chinese government balks at Google's demands for an honest search engine, or if the implied accusations levied against the government -- that it hacked into Google to monitor the email accounts of human-rights activists -- are true?
Foreign investments in China would dry up quicker than a wintry prune. Baidu's healthy valuation premium would deflate.
I'm a huge fan of Baidu. I was fortunate enough to recommend the stock to Motley Fool Rule Breakers subscribers while it was still trading in the double digits nearly four years ago. However, even I see that these short-term gains can lead to long-term pain.
Baidu needs Google to stay in China.
2. Throwing $300 million at the problem
Retailing has been a hard game to win for GameStop
A stock-repurchase program can be a smart move if the stock truly has bottomed out and if a company doesn't have more appealing ways to deploy its greenbacks. It can be a travesty when the company is delusional.
GameStop's buyback press release doesn't play it modest. The company describes itself as "one of the world's fastest-growing retailers," even though comps fell by a whopping 8.6% over the holidays. It also "intends to continue its aggressive roll-out strategy of opening new stores worldwide," even though multiplying the number of cash registers isn't going to help reverse the comps.
As I noted earlier this week, GameStop called bottom in May, August, and November of last year. It seems to be doing so again.
3. Not down with the downgrade
Shame on you, Piper Jaffray. The analyst firm downgraded shares of Lumber Liquidators
Real-estate-related stocks may seem like crummy plays in this climate, but Lumber Liquidators is coming off a year in which net sales grew by 13% and margins expanded to drive earnings growth of at least 27%.
4. Fee-nancial services
It's time to make the "too big to fail" banks too big to succeed.
The proposed Financial Crisis Responsibility Fee may sound good on paper, but it's never going to work. Levying new taxes on the financial-services giants that would have collapsed without a bailout -- how will this make them stronger? Cracking down on bonuses paid out to executives of banks that made incompetent decisions -- how is this going to help them recruit smarter talent? Layers of scrutiny and fees on banks that taxpayers now have a vested interest in -- how will this make those banks more valuable?
We've become bloodthirsty savages that won't rest until we've beaten Goldman Sachs
5. Checks and bag lances
UAL's
Are any of these airlines seeing those Southwest
However, the backlash is going to be huge for these checked baggage fees. Airlines will need to order new planes with double the overhead carry-on space to keep up with the savvy passengers.
Like so many botched flights these days, ill will never take off.
What's the dumbest stock move you made in 2009? Humble yourself in the comment box below.
