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FOOL ON THE HILL
A November to Dismember

As we enter the long Thanksgiving holiday weekend, Rick Munarriz takes a look back at the market events that transpired this month. It was a meaty month. Pass the gravy.

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By Rick Aristotle Munarriz (TMF Edible)
November 29, 2002

In the mood for leftovers? I can already see you forking the last of your turkey omelet, washing it down with a cranberry smoothie, and coming to grips with the fact that turning your stuffing remains into bread pudding wasn't the grandest of culinary ideas.

All things said, it was a wild month in the market. Sure, you ate plenty last night but November has seen its share of eights, too. 8 Mile. Eight Crazy Nights. Wall Street looking to close in on eight consecutive weeks of higher stock prices. Shares of 8x8 (Nasdaq: EGHT) nearly doubling. Unreal. But since you're here instead of elbowing your way past your local mall rats to snag some choice holiday bargains, let's take some time to reflect back on some of the November market events that gave us writing types such excellent fiscal fodder.

Last week, AOL Time Warner (NYSE: AOL) revealed that it would begin selling prepaid Internet access cards for America Online. If this sounds like something that you would find wedged between the Big Gulp and Slurpee machines at your local 7-Eleven (NYSE: SE), you're close but no beef jerky cigar. The company will be selling the cards for a la carte online minutes though venues like Target (NYSE: TGT) and Office Depot (NYSE: ODP). Yes, you know exactly what this means. Just as the warning signs should have been blaring months ago when the AOL software CDs were being mailed out with huge "New! No Credit Card Required" stickers, the online titan is officially skimming the bottom of its target market for growth. This is a junkie cracking open his little brother's piggybank or rifling beneath the sofa seats for spare change. Oh, the things that companies will do for a hit as the shark tank looms below. 

And what's the deal with those overweight Bronx kids suing McDonald's (NYSE: MCD) for making them chunky? If my kids aren't giddy over their next Happy Meal, can I sue the burger chain for false advertising? If this plays itself out against Mickey D's I know exactly what I'm going to do. I'm going to sue Anheuser-Busch (NYSE: BUD) for not encouraging underage drinking. My high school days would have been so much more gratifying if I would have appeared more attractive to the opposite sex. You'll pay, Bud.

You've got to hand it to Microsoft (Nasdaq: MSFT). Literally. While the company is losing money on its mobile, Internet, and Xbox divisions, it's doing just fine thanks to producing huge 85% margins on its operating system. The last time I saw Windows this marked up, I was staring at my church's stained glass artwork. But Microsoft also scored a major coup earlier this month when U.S. District Judge Colleen Kollar-Kotelli ruled that not only do all the double L's in her name look awfully cool, but upheld the Justice Department's rather light settlement. In other words, that flesh on chrome sound you just heard was Microsoft depressing the pause button on world domination. 

Remember the old Smith Barney ads, where actor John Houseman and his gritty inflection bragged about making money the old-fashioned way? "We earn it," he would say. Well, now as Salomon Smith Barney is under the paternal wing of Citigroup (NYSE: C), I guess we're all starting to realize that "earn" and "urn" sound exactly the same. The security arm is being blasted with $500 million in fines due to accusations of spinning IPO shares to corporate executives to win over their business. One of the more intriguing allegations is tied to fallen telecom analyst Jack Grubman. Mysterious circumstances are being traced to his twins being accepted into a prominent New York City preschool after a Citigroup donation to the school. Why did Citigroup make the donation? Could it have been a reward to Grubman after he upgraded shares of AT&T (NYSE: T) to "buy" from "hold" -- just in time to win some investment banking business from the troubled blue chip? I can argue that it's pretty funny when any phone company is rated "hold," but I would prefer to point out that maybe it's not the twins that are in need for some serious schooling.

Belated commiserations go out to Gateway (NYSE: GTW). The cash-rich yet fundamentals-poor computer maker revealed that it has been the subject of an SEC investigation for nearly two years. Two years! That was so long ago that the company was actually profitable then. Investors have a right to have a cow over the company keeping this information secret for so long. It turns the stomach -- all four of them.

Despite a lack of interest, I'd like to point out that the Federal Open Market Committee did lower rates this month. Dropping the Federal Funds rate to 1.25% has sent yields on money market funds diving below 1%. With fund expenses constant and interest rates possibly heading lower still, money market investors may be wondering if it's only just a matter of time before they begin being billed monthly. Yes. I'm kidding. Mostly.

Harvey Pitt is gone. The controversial SEC chief stepped down after 15 months on the job. The Pitt hit the fan when the person he appointed to head up the accounting oversight board was himself on the auditing committee for a company being investigated for fraud. This isn't just a case of letting the fox guard the henhouse. This is handing the fox KFC franchising rights to the place.

We also kicked the month off with midterm elections that shifted more legislative power to the Republican Party. Rather than make a politically charged statement that might piss roughly half of you off, let me just add that I'm from Florida. Who would have thought the day would come when that in of itself would be a self-effacing comment. What's worse is that I'm here in Miami where dead voters count, live ones don't, and our baseball team couldn't afford to pay its mascot $75,000 next year but is willing to pay the Braves $30 million over the next few years to have Mike Hampton pitch against them.

It's great work if you can get it. Me? I don't get it. But I'll bet you that last pumpkin pie stuffed cannoli that December will be hard-pressed to be as exciting as this month was.

Rick Aristotle Munarriz loves November so much he thinks they should get a room. Rick's stock holdings can be viewed online, as can the Fool's disclosure policy.



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