This Month's 5 Dumbest Moves

I write a weekly column every Friday detailing five dumb financial events that took place earlier in the week.

February was particularly rich in fiscal buffoonery so I figured I would revisit and update some of those entries in going over five stupid things that happened.

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. Cruising like Augustus Gloop
Carnival
(NYSE: CCL  ) has another maritime disaster on its hands.

The idling of the Carnival Triumph this month -- which clearly is not on the scale of the liner's deadly Costa Concordia mishap last year -- has set both Carnival and the cruise industry back.

Engine fires will happen, but taking five days to tow the idled ship ashore as stories surfaced of overflowing sewage, a scarcity of power and plumbing, and long lines for food is going to make it hard for the cruising industry to command the kind of rates on future sailings that it was collecting before the ironically christened Triumph's failure.

Why did it take this long? Why were passengers subjected to such deplorable conditions? Expect lawsuits to keep this in the news, tarnishing Carnival's brand along the way. Like Triumph toilets, you just can't flush this sewage away so easily.

2. Range Anxiety: The Musical
Things got testy between Tesla Motors' (NASDAQ: TSLA  ) Elon Musk and a reviewer whopanned a test drive of the Model S sedan.

The New York Times' John Broder offered a pretty scathing critique on an extended test drive that culminated in a tow after the vehicle stalled between recharging stations.

Musk was quick to defend his all-electric car. A check of his logs showed that Broder didn't wait for the charging process to complete at most of his checkpoints, drove over the speed limit in some cases, and took some extended detours.

Apart from the creepiness of Tesla monitoring every action a reviewer makes -- something that Tesla emphasized it doesn't do with its actual customers -- Musk's original defense paints the car in an unflattering light.

  • You're not supposed to drive a Tesla fast?
  • You pay nearly $80,000 for the high-end model yet you still have to wait a long time at recharging stations?
  • Isn't driving a fun car supposed to be about the detours?

Musk was right to defend his car against the claims, and it helped Tesla's cause that others duplicated Broder's exact trip without any hiccups. However, sound arguments fall apart when they're not particularly flattering for the premium luxury car.

3. These guys could use an "easy" button
No one will argue against the combination of OfficeMax and Office Depot (NASDAQ: ODP  ) . The two office supplies retailers are struggling to grow, and there will be some real synergies realized as the two chains hook up.

However, Office Depot leaked the news prematurely.

News of the merger was buried in the company's earnings release, at least two hours before the news was supposed to go out. Office Depot had to retract the release and OfficeMax and Office Depot scrambled to crank out a joint announcement more than two hours later.

This apparently wasn't Office Depot's fault. Thomson Reuters took the blame for the premature press release. The merger was rumored to be in the works for days ahead of the early wedding announcement, but it was still a boneheaded move.

4. Penney for your thoughts
J.C. Penney
(NYSE: JCP  ) continues to be a disaster.

The rudderless retailer posted an embarrassing 31.7% slide in comps during the holiday quarter ending in January.

Yesterday's report was dreadful, and the trend has been disheartening. Same-store sales fell a sharp 18.9% during the quarter ending in April after the company initiated CEO Ron Johnson's new "fair and square" model. Comps then went on to slip 21.7% in the quarter ending in July, and by 26% in the October quarter.

Johnson was wrong. His dream of replacing sales and coupons with everyday low pricing has been a disaster. It frightened off loyal shoppers, and it wasn't enough to woo adequate replacements.

The good news, one can argue, is that now the disappointing department store operator will come up against these steep declines.

It can't get much worse. Right?

However, it did get that far -- and how Johnson is still around after taking a bad hand but playing it horribly is beyond reason.

5. Social disorder
It wasn't a banner month for Facebook (NASDAQ: FB  ) , and not just because it's trading 13% lower in February after rallying in prior months.

There are two mishaps worth highlighting here.

The first came on Feb. 7, when -- for a few harrowing minutes -- websites with Facebook Connect buttons found visitors redirected to a Facebook error page. They couldn't access the websites that they wanted to visit.

The problem was quickly rectified, but not before countless users felt they had come across a virus that was hijacking visits to their favorite websites. The event will likely lead many to wonder if Facebook has too much power if its app can take visitors on this kind of joyride.

The other issue involves how Facebook communicated a potential video advertising product.

Facebook's VP of marketing was asked during The Future of Media conference if the social networking giant would consider running auto-play video ads. These are the multimedia spots that kick in the moment that someone visits a website.

"I believe there are ways we could do it," he responded, assuming that the ads would not be destructive to the user experience.

Wrong answer. Any auto-play ad -- by definition -- is destructive to the user experience.

Aim for smart moves
After the world's most hyped IPO turned out to be a dunce, most investors probably don't even want to think about shares of Facebook. But there are things every investor needs to know about this company. We've outlined them in our newest premium research report. There's a lot more to Facebook than meets the eye, so read up on whether there is anything to "like" about it today, and we'll tell you whether we think Facebook deserves a place in your portfolio. Access your report by clicking here.


Read/Post Comments (4) | Recommend This Article (2)

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  • Report this Comment On February 28, 2013, at 10:50 AM, Lunchlady21 wrote:

    Part of JCP's problem is that they have changed their target audience. The catalog is awful and full of twentysomethings. Most of the clothes pictured are wrinkled - are they supposed to be that way? I used to buy professional clothing, casual, just about anything I needed. Anyway - apparently I'm not their target audience anymore. FYI - JCP was the first credit card I ever got 30 years ago. Very sad.

  • Report this Comment On February 28, 2013, at 12:58 PM, F2JP wrote:

    I have some questions about comments you made about the Tesla\NY Times non-event.

    •“You're not supposed to drive a Tesla fast?”

    Tesla makes many mentions about how fast the Model S is. I have seen more than one video on YouTube illustrating how fast the Model S is.

    http://www.youtube.com/watch?v=VLCdP6sMN9k

    http://www.youtube.com/watch?v=Y_gS2KZmnbg

    Do you really think it would have been wise for Musk/Tesla to recommend in his comments that a tester drive at 80-85 MPH in a 55-65 MPH Zone?

    The car is plenty fast, I have not seen anyone dispute that.

    •“You pay nearly $80,000 for the high-end model yet you still have to wait a long time at recharging stations?”

    What is a long time?

    Tesla Superchargers give 150 miles charge in 30 minutes.

    I can’t make a pit stop at a gas station on a long trip in less than 30 minutes, so I don’t understand your point.

    http://www.youtube.com/watch?v=KkDY9pDqrbc&feature=endsc...

    I suggest you drive the Model S on the same route, using the same amount of common sense that you would while driving a gas powered car, things like filling the tank completely whenever you refuel rather than partially. Then write an article about the Model S.

    I read Broder’s article, and the Model S logs and comments very carefully and the very obvious inconsistencies in Broder’s article, together with the timing raise some serious questions as to his intent.

    I believe that Broder’s Article, not Musk’s Response, should have been the item on your list of Dumb Moves.

    It seems to me that fraternity rather than clear facts might have been your motivation to side with Broder.

  • Report this Comment On February 28, 2013, at 2:21 PM, LoveMyTesla wrote:

    I'm a Tesla Mode S owner, and yes, it's a fun car to drive, but until the EV charging infrastructure expands some more, you do have some limitations on which detours you take!

    With that said, it looks like electric cars and plug-in hybrids are here to stay, so we should continue to see a growing network of EV chargers and charging stations, not to mention Tesla's proprietary SuperChargers.

  • Report this Comment On February 28, 2013, at 2:27 PM, LoveMyTesla wrote:

    F2JP...yes, it sounds like he was, sort of, defending Broder. Broder was the idiot and sounds like people are trying to pull, as much as possible, some of Elon's comments out of text.

    I bet nobody ever will "manipulate" another car review again now that they know there are GPS' installed!!

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