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. Who's the virgin now, BK?
In a marketing campaign that is likely to backfire, Burger King (NYSE: BKC ) is rolling out Whopper Virgin ads. The company is traveling the globe by plane, helicopter, and even dog sled to give folks their first taste of the company's signature burger. Handing over Whoppers and Big Macs to first-time nibblers for independent taste tests may sound novel at first, but then the questions come.
- Is someone in a rural hill village in Thailand enough of a foodie to be a credible source on discernable taste?
- Should a seasoned vet of the icy tundra of Greenland really be introducing fatty burgers into his diet?
- Have you seen the fat and caloric content of these sandwiches? If handing them over to a farming village in Romania is going to rile critics into shouting about the unhealthiness of your burger, won't this be a detrimental ad campaign?
Burger King is countering that it's actually making a difference in deflowering these Whopper Virgins. It is donating educational equipment and medical supplies to help these faraway citizens of the world. Let's just hope that some of the medical help includes cholesterol-lowering pills.
2. Home is where the lard is
Just when I start warming up to Treasury Secretary Hank Paulson, he does something that sends a shiver down my spine. The new plan is to work with Fannie Mae (NYSE: FNM ) and Freddie Mac (NYSE: FRE ) to offer 30-year loans for as little as 4.5%.
Great! Just what the housing market needs: More artificially supported pricing. Interest rates aren't too high -- home prices are. It won't be until existing homes sell for substantially less than their replacement value -- enough to force residential developers to shut off the spigot of new construction -- that we can begin to work through the glut of homes already on the market.
Greed got the best of us. Speculators bought too many properties that now sit vacant. We don't need cheaper financing. We need fewer homes at lower prices. Condo flippers are now burger flippers. Move on.
3. Only bunk-bed owners should call bottom
The once iconic Bill Miller did something gutsy this week: He drew the line. At a Legg Mason (NYSE: LM ) luncheon on Wednesday, Miller suggests that it "looks as if the bottom has been made in U.S. equities."
How are investors supposed to take that? When Miller was at the top of his game -- when his growth-spiked value fund at Legg Mason raced through 15 consecutive years of beating the market -- his words moved mountains. However, those rolling mountains on wheels are so 2005. Barring a last-minute miracle, this will be the third straight year in which Miller's fund loses badly to the S&P 500.
You also have Miller's commentary from a year ago, pitching financials and consumer stocks. Doh! Two months later, he was suggesting that Yahoo! (Nasdaq: YHOO ) should hold out for more than the $31-per-share Microhoo offer that was on the table. Double doh!
We all make bad calls, and Miller has certainly made enough great calls to offset some of his recent blunders. However, maybe money managers who have put up three years of abysmal returns shouldn't call bottom. It is disrespectful to his investors who have every right to wonder why they were exposed to such great risks if Miller now sees the bottom.
The next fund manager to call bottom can change a dirty diaper.
4. Roses are red, viral is blue
Will daily discounts tarnish the opulence of Blue Nile (Nasdaq: NILE ) ? The upscale jeweler launched a "Daily Gem" marketing promotion this week, featuring a markdown on a particular item every day between now and Christmas.
Sure, this is going to give patrons a reason to check the site daily. There are entire sites -- such as Woot! -- that are based on that very premise. However, if it spoils potential bling buyers with discounts, what will it do for an encore come January? As the classiest publicly traded e-tailer, Blue Nile has enjoyed its prestige. Sure, stateside sales have fallen for three consecutive quarters, but following the herd with the discounting isn't all that becoming.
5. HP stands for Hit Points, Mr. Softy
Microsoft (Nasdaq: MSFT ) blew a Black Friday promo, and it's been feeling the heat this week. Its Live Search Cashback program was offering up to a whopping 40% rebate on PC and laptop orders placed through HP.com.
The whole thing was a disaster. Getting through was nearly impossible, and many of those who did were shocked to find that the rebate was just 3%. Sure, Microsoft will make good on this somehow. However, as the first holiday shopping season with its Live Search Cashback, this will be a first time to forget for Mr. Softy.
Cashback Virgins, anyone?
Let's beat the Dumb Drum:
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