Despite more "official" word that the economy is shrinking, The Motley Fool 50 index inched slightly higher today. And guitars everywhere gently wept on news that former Beatle George Harrison passed away yesterday after a struggle with cancer. Rest easy, George.
In Today's Motley Fool Take:
We started the week with "official" word that we've been in a recession since March, now we're going to end the week with news that the economy shrunk more than expected in the third quarter.
The Commerce Department reported today that the Gross Domestic Product (GDP), a good proxy for total economic activity, shrank at an annual rate of 1.1% in the third quarter. This was far worse than the modest 0.4% contraction the Commerce Department first estimated and also generally worse than most Wall Street predictions. This is also the sharpest decline seen since 2.0% shrinkage seen in Q1 of 1991, the height of the Gulf War as well as the last recession.
The silver lining with this news is that, even with interest rates at historic lows, it certainly leaves the door open for another rate cut by the Federal Reserve before the end of the year. Moreover, an argument could certainly be made that given the earlier estimated recession start date as well as the higher-than-expected severity in the third quarter, we may be further along in the recession than first believed. Further along in a recession means a recovery could be closer, but it's really anyone's guess when the economy will truly start growing again.
In a masterpiece of doubletalk and cover up, mutual fund company Invesco announced that it will offer its currently no-load mutual funds to new investors solely through investment advisors. Just try to find one word in Invesco's letter or so-called "FAQ" that tells the ugly truth about the new Class A, B, and C shares: New investors will be paying loads for formerly no-load funds, dramatically reducing returns.
Invesco's goal is solely to boost profits. By offering financial advisors an incentive -- a commission that investors will pay in part through a load of up to 5.5% -- Invesco hopes advisors will push its funds. And they just may snare unsuspecting individual investors who hire a financial advisor without investigating whether the advisor makes money selling products regardless of their performance or suitability.
For some time Invesco's television commercials have badgered us with the tag line "You should know what Invesco knows." Well, today it's all too glaringly apparent: Invesco knows they can take advantage of you by fooling you into letting them take more of your money. Don't do it. If you want a stock mutual fund, go with a no-load, low expense, broad market stock index fund. Invesco's move is proof that most fund companies are all about marketing and company profits, not about making more money for you.
Enron's (NYSE: ENE) unprecedented collapse is being blamed on everything from hubris to poor corporate governance, but astute observers will note this is yet another occurrence of the dreaded "Naming Rights Curse." This was just the second season the Houston Astros played in Enron Field, a beautiful downtown ballpark with an ugly name. It may be the last.
Other companies that are now scraping for pennies have shelled out millions to have stadiums named after them. The Super Bowl champion Baltimore Ravens play in PSINet Stadium, named for a company that has filed for Chapter 11 bankruptcy. CMGI (Nasdaq: CMGI) agreed to pay $115 million for the naming rights to the New England Patriots' new stadium, and its stock price has collapsed to $1.97 from an all-time high of $163. Since sponsoring the Indiana Pacers' new arena, Conseco's (NYSE: CNC) stock has fallen from about $35 to $5.
There's more. 3Com (Nasdaq: COMS), 95% off its all-time high, has informed the San Francisco 49ers it won't be renewing the rights to put its name on Candlestick Park. Miami's Pro Player Stadium is named for a company that no longer exists, as is St. Louis' TWA Dome.
The backlash is real. Invesco Funds won't be getting its $120 million worth in Colorado, because the Denver Post has refused to call the Broncos' new stadium "Invesco Field at Mile High." In Philadelphia, 76ers and Flyers fans affectionately refer to the First Union Center as the "F.U. Center."
The gods of sports world have been fed up with this ridiculous corporate invasion of our national pastimes ever since sportscasters tried to say "Poulan/Weed Eater Independence Bowl" with a straight face. Beware, corporations... like the Curse of the Bambino, this hex is nothing to mess with.
Sometimes when you're building momentum, the sawdust gets in your eyes. Home improvement superstore chain Home Depot (NYSE: HD) announced that sales growth for next year will be flat, flatter than plywood actually. However, it is still expecting higher earnings as gross margin expansion and tighter overhead control help prop up the bottom line.
While the company expects profits to grow in the 18-20% annualized range over the next three years, and company-wide sales to double by 2005, its outlook for the industry as a whole is not as promising. The orange apron gang is looking for the sector to grow by just 3% over the next three years.
As bleak as that may seem, it might actually prove to be overly optimistic if interest rates continue to inch higher, turning off the spigot of home purchases and refinances that has helped the industry in the past. Recession and deck projects hardly go hand in hand. If no one is building you can get hammered selling hammers. So, respect Home Depot's ability to lay out the blueprint of over-performance in a sector heading into a questionable period -- just don't forget to put on a hardhat.
With the economy stalled, the job market is tough. However, tens of thousands of Americans are still landing job interviews every day, and they're eventually landing jobs, even if it takes longer than usual. Because many of us are interviewing for jobs right now, and interviews are a tricky thing, we want to share with you the top five things that you should NOT do on your job interview:
5. Eagerly inquire whether the company will be adopting the French government's four-day work week anytime soon.
4. When asked why you want to work at the company, admit that the primary reason is because your countless attempts to get on Who Wants to be a Millionaire haven't panned out.
3. When asked to describe your life-altering experiences, recount in intimate detail your seven-day tequila binge in Cancun.
2. When the topic of benefits is addressed, ask if your Viagra prescription will be covered by the company's health insurance policy -- retroactively.
And the number one thing that you should NOT do on your job interview:
1. Wear a baseball cap that sports your former employer's logo and weep openly at each mention of the company's name.
Good mutual fund managers are a great source of new stock ideas. Find out the ones we like in this month's issue of The Motley Fool Select.
Semiconductor chip equipment manufacturer Novellus (Nasdaq: NVLS) dropped nearly 8% today after a midquarter release after market close Thursday indicated the company would meet its fourth-quarter earnings per share target of $0.11 but would post a loss in the first quarter of 2002 and possibly the second quarter, too. Brethren KLA-Tencor (Nasdaq: KLAC) and Applied Materials (Nasdaq: AMAT) also dropped about 4% each.
Telecom giant Cable & Wireless (NYSE: CWP) fell 5% after it agreed to purchase former Web-hosting powerhouse Exodus for $850 million in cash. Two days ago, Exodus laid off 200 of its employees, telling the rest that their jobs were secure. Cable & Wireless says that it expects to complete the transaction via auction in January 2002.
Kimberly Clark (NYSE: KMB), the maker of Kleenex tissues, announced that it would close five plants and lay off 2% of its workforce in an effort to meet its estimates for 2002. The market showed approval for the gesture by moving the stock up almost 5%.
On Thursday, XO Communications (Nasdaq: XOXO) announced that Telefonos de Mexico (NYSE: TMX) and Frostmann Little, a firm specializing in buyouts, plan to pay $800 million to take control of its heavily indebted telecommunications business (Drip Port passed on XO in February). This buyout would eliminate $4.7 billion of XO's $5.7 billion in long-term debt, but leave shareholders with essentially nothing and bondholders with 22% of the company. Nasdaq halted the stock, demanding more information.
To our friends and former co-conspirators -- Ann, Allie, Bill, Brian, Dave B., David M-N, Heather, Josie, Mike, Mona, Robyn, Paul C., Paul L., Rich, Rick, Roy, Cheeze, Sue, and all other Fools setting out on new adventures -- we send our love, admiration, and wishes of good luck! We miss you all already.
Today on Fool.com: Bill Mann writes about the Enron fiasco in the Fool on the Hill.... Find out how not to break your bank this holiday season.... And Tom and David Gardner discuss stocks, business, and personal finance on NPR's Talk of the Nation.
Contributors:
Zeke Ashton, Brian Bauer, Bob Bobala, Robert Brokamp, Jeff Fischer, Tom Jacobs, Paul Larson, Brian Lund, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Dayana Yochim
RSS Headlines
Fool UK
