Federal Reserve Chairman Alan Greenspan spoke before the U.S. House's Financial Services Committee this morning, and then the Green-speak interpreters went to work, trying to read between his lines. A Reuters report, for example, says Greenspan "expressed confidence... that the U.S. economy was emerging from recession but warned the recovery was likely to be moderate in what economists took as a signal interest rates would remain steady for some time."
Despite Greenspan's prediction of a recovery, there are still some negative signs out there. New home sales in January, for instance, experienced their biggest drop in eight years -- falling off 14.8% to a seasonally adjusted 823,000 in what had been an extremely hot housing market.
The Motley Fool 50 index called the economic news a draw and finished off the day flat.
In today's Motley Fool Take:
March Madness for Hewlett-Packard
With its merger vote now just three weeks away, the fireworks show no sign of winding down in the proposed pairing of Hewlett-Packard (NYSE: HWP) and Compaq (NYSE: CPQ). While our Dueling Fools butted heads over the merit of the deal back when it was first announced in September, we weren't the last to clash on the subject.
The Hewlett-Packard founding families have been protesting the course the company is taking in its attempts to swallow the troubled computer maker, and now the dissension is spilling over into the institutional investor ranks. This one is still too close to call before the March 19 date with the ballot box.
While Hewlett-Packard CEO Carly Fiorina continues to champion the merged company as two interlocking puzzle pieces, board member and corporate namesake Walter Hewlett is urging the company to forget about all of the Compaq nonsense, trim some of the company's own fat, and focus on its printing stronghold.
This morning, while conceding that the merger would be saddled with $1.4 billion in one-time charges, Hewlett-Packard continued to pound the table on the accretive nature of the deal. While Wall Street is looking for the company to earn $1.35 a share in fiscal 2003, add in Compaq's projected earnings and adjust for the new shares that will be outstanding and it is up to $1.51 a stub.
Hewlett-Packard has taken to running full-page ads to sell the deal to the public. It's going to be March Madness, folks. Grab a good seat for the rest of the show.
Yea? Nay? Where do you see Hewlett-Packard -- and Compaq -- a year from now? All this and more -- in the Hewlett-Packard Discussion Board. Only on Fool.com.
CEO Compensation Indignation
Yesterday, The Wall Street Journal named several executives who have amassed millions while their companies' market caps lost billions. Surprise! Their underlings didn't fare so well.
The list of over-compensated execs includes:
John Legere, who was the CEO of both Global Crossing (OTC: GBLXQ) and Asia Global Crossing (NYSE: AX). Upon his departure from the latter post -- at which point, the company's stock was down 90% over the previous year -- Legere was forgiven the $10 million remaining balance of an interest-free loan, and given a $2.75 million severance payout. Meanwhile, since Global Crossing declared bankruptcy on Jan. 28, the company stopped severance payments to workers who had already been laid off.
Former Lucent (NYSE: LU) CEO Richard McGinn. He was given a severance package worth $12.5 million in stock and cash, plus an annual pension of $875,000 -- after being fired.
WorldCom (Nasdaq: WCOM) CEO Bernard Ebbers. The company lent Ebbers $341 million to cover margin calls, and extends him a $165 million line of credit at 2.2%. WorldCom stock, which once traded at more than $60 a share, is now down to $7.47.
Kmart (NYSE: KM) CEO Charles Conaway. Though the company has declared bankruptcy, it asked the court to approve a $6.5 million bonus for Conway and to forgive his $5 million loan.
Finally, we have the much-maligned Ken Lay, former Chairman and CEO of Enron. He sold $70.1 million worth of stock between February and October of 2001, right before the company's collapse. Laid-off employee Marie Thibaut claims that Enron has paid her one-tenth of the severance it owes her, while the company has paid $55 million to 500 current employees in bonuses.
Mann Child Born
Resident muckraker and sentimental Foolish troubadour Bill Mann (TMF Otter) and his wife Judy had their second child yesterday. Alexandra Jennifer, also known by her Chinese name Tien Tien (which means "sweet, sweet"), dropped into the world weighing a cool 7 lbs. 5 oz. The Hamm Mann was resting peacefully today. So were mom and child. Congrats!
35% Interest Rates: Outrageous or Reasonable?
It's the best of times, it's the worst of times. The economy has been in a slump, but interest rates are low. According to CardWeb.com, the average national credit card rate dropped from roughly 16.5% to 14.5% throughout 2001. Good news for borrowers, right? Well, not for all.
It's apparently the worst of times for credit card lenders. With the economy recessed, it's not a stretch to imagine people buying and charging less, and having trouble paying their bills. In response, many lenders have jacked up the rates that they charge their riskiest customers. (These include those with poor credit histories, as well as many with little or no credit histories, such as college students and immigrants.) The increases are explained as necessary, covering risks borne by lenders.
In a recent Associated Press article, Michelle Liedtke pointed out some of the biggest offenders. Providian Financial Corp. (NYSE: PVN) has hiked its high-risk rate from 23.9% to 29.9%, while CompuCredit Corp. (Nasdaq: CCRT) is charging 35%. These rates apply to 18% of Providian's customers and 12% of CompuCredit's portfolio.
Liedtke described a single mother who earns $58,000 and owes $23,000 on several cards. Since her average rate is 20%, she must cough up $4,600 annually to cover interest payments alone. To reduce her balance, she must pay even more. If she needs to charge any additional expenses to her cards (which can happen despite best intentions, such as in the case of illness or automotive crises, for example), then her situation will become even more dire.
Pay off your credit card bills in full each month, if you can. If you can't, learn to dig yourself out of debt. Many Fools in our community have dug themselves out from under tens of thousands of dollars of debt. There stories are available on our Credit Cards discussion board. It can be done!
Shameless Plug Dept: Crack the Code
It's a skill every investor needs, but reading financial statements doesn't have to be like cracking the code that unlocks the mysteries of the universe. We have a self-paced online seminar that will help you develop your analytical skills one step at a time. Don't underestimate the dividends that knowledge can pay!
Integrated Defense Technologies (NYSE: IDE) began trading today, marking the third defense-related IPO in the last two months, following United Defense Industries (NYSE: UDI) and ManTech International (Nasdaq: MANT). Integrated, which produces advanced electronics for the military, finished the day up -- 15% over its initial price of $22.
Did ImClone (Nasdaq: IMCL) jump today, or what? The drug maker was up over 30% on news that it -- and partner Bristol-Meyers Squibb (NYSE: BMY) -- may be able to win FDA approval to sell cancer-fighter Erbitux without having to undergo new testing.
Already-battered clothing retailer Gap (NYSE: GPS) took another hit today as Moody's rated as junk the $1 billion convertible note the company wants to sell next week and also cut some of Gap's existing loan ratings. On Tuesday Gap reported its first back-to-back fourth-quarter loss.
Pizza restaurant firm Papa John's International (Nasdaq: PZZA) rose nearly 12% today after it reported fourth-quarter earnings of $11.5 million, or 51 cents a share, up from its year-ago profit of $10.8 million, or 47 cents a share, and in line with the average estimate of analysts polled by Thomson Financial/First Call. Fool staff apparently contributed heavily to Papa John's revenue stream.
As Enron Turns: Today, Wall Street analysts had their turn to testify before Congress, trying to explain why many of them had "buy" ratings on Enron well after troubling signs began to emerge. The analysts blamed Enron, saying it withheld important information from them. To their credit, the Congressmen weren't buying it. Referring to the conflicts-of-interest generated by investment banking relationships, Sen. Carl Levin (D-Mich.) said, "It's not hard to understand why the financial analysts waited so long to issue a 'sell' recommendation, when so much hung in balance."
Today on Fool.com: Rick Munarriz asks if your companies' accounting practices could take them down in flames.... In the end, understanding financial statements is the cornerstone of sound financial analysis, and it just might help you avoid the Enrons of the future.... Need tax help? The Fool has lots of resources for you. Start here!
Contributors:
Brian Bauer, Bob Bobala, Robert Brokamp, Jeff Fischer, Tom Jacobs, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Dayana Yochim
![Subscribe to Fool.com Headlines [RSS 2.0]](http://g.fool.com/art/icons/rss_30x14.gif){kind=icon}
RSS Headlines
Fool UK
